WDMM
This is fantastic!
Dear Mr. Boyd
With the on-going pay dispute we thought you might appreciate another perspective of Virgin Atlantic's financial position. We have researched this document using the following sources -
A partner who is the Head of Audit at a large city accountancy firm, with access to specific airline industry data. They helped us produce the UK information and introduced us to the following contacts.
A Senior analyst at a major ratings organisation on Water St, New York. We had an hour long meeting with this gentleman on a recent trip.
We are in email contact with an executive of a financial investigation company based in the British Virgin Islands. The company act on behalf of financial institutions in the BVI and their role is to ensure money entering the banking system there is legitimate. They have considerable knowledge of the Virgin group and their financial activities in the region.
This information was not paid for, but given to us on the back of relationships spanning 10 years. Virgin Atlantic will try to deny the content of this document, but we have been told with some confidence that if you were to get sight of the companys full accounts, specifically the ones that deal with Virgin Nigeria, then your own accountants would be able to verify this information.
Other sources of information were Companies house, The Press association and information given to us by our grounded crew working in other areas of the company. We have tried to simplify the figures and information that we have been given.
How is Virgin Atlantic really doing?
Prior to any wage settlement Virgin has always communicated a negative outlook for the company's financial state. It is therefore not a coincidence that this time; the old line was rattled out to the crew through the usual company communication lines. When we spoke to both the accountants and analysts they made two interesting points.
1. The Virgin group has long been recognised for producing a business model that produces huge levels of revenue, yet is always able to deliver low levels of profit using the most ambiguous and complex methods of accounting. This point in particular seems to be causing Singapore Airlines considerable frustration, to the point where they are considering severing their relationship with us. Quite simply they just don't understand where their share of the money is going.
2. With arguably one of the best route structures and one of the lowest cost bases, then why are we not delivering 7-10% profits? Surely if the companys line on our present financial situation is true, then why have not any of our directors been held accountable. Why are they still receiving their bonuses? No other company would be so forgiving.
So what are the real facts?
Revenues are increasing. 13% increase in last financial year from £1.88b to £2.14b
Increases to revenue through extra charges to customers, credit card charges and the fuel surcharge.
Virgin generates £26-£30m a year in interest from it's UK bank accounts holding £450m in cash.
Passenger numbers are up 10.5% at 5.1m. How often do we see an empty UC seat?
New routes are opening up. Nairobi, Mauritius are the latest
Investment in lounges at LHR £11m. Plus improvements to other destinations
Investment in major buildings. The Base estimates run at £16m +
Substantial new aircraft orders for 15 B787 worth £4 Billion, with options for 20 more
Pledges of £1.6b over the next 10 years for investment in green fuels
We are regularly told about the damage that the cost of oil at $80 a barrel is doing to the company, but they never seem to make mention of the weak dollar and the benefits it has to both our oil/aircraft leasing costs/Increased pax numbers visiting the USA.
A considerable settlement was reached with the pilots union in their last pay negotiations. This now makes them the best paid long haul pilot workforce in the UK based on an hourly rate. BA get more money but have to work more hours.
Virgin Nigeria
Virgin Atlantic made reasonable profits taking out the Virgin Nigeria effect. So could our investment in Virgin Nigeria be seen as a bad decison? We think not.
Can we really own 49% of a company with losses of 50% on £80m revenue?
A good question would be where has the £40m loss gone?
One of the areas the pilot unions originally identified was significant funds generated by Virgin Atlantic yet held outside the normal banking structures. Operting from Nigeria has opened up the opportunity for the company to work within a very relaxed corporate structure, using a beneficial taxation system and a much less stringent accounting method, as a result it is has been easy to withdraw money and write it off as a loss to Virgin Atlantic.
We have ben passed information from the financial investigator in the BVI showing £13.5m being transferred from Virgin Nigeria to accounts held by Virgin in the BVI. The funds held there are described as very significant. We do not think it is a coincidence that SRB has moved from Oxford to the British Virgin Islands.
What do we cost the company?
The crew represent more than 55% of the workforce yet only cost 3% of the total revenue.
The average cost of a Virgin Atlantic crewmember is £12900 across all ranks. The national average for the UK is £22,800. We are based in London where the average salary is £32000. The only place Virgin could find cheaper labour is by recruiting in the Third world, of which it is increasingly doing so (We understand approx 400 Nigerian, Indian, Chinese crew are employed by Virgin). The next time you speak with an Indian crewmember ask them how much they earn and you will quickly learn how Virgin is exploiting cheap labour across the world.
Virgin can afford to invest in us and as we outlined in our recent communication to you, the huge majority of the crew want a 2 year deal, backdated.
We will back the following deal
FSM - £28000/£14000 cost £1.6m
CSS - £22000/£11000 cost £2.1m
SFA/JNR/IFBT - 10% over 2 years - cost £4.1 m
Total increase to salarys is £7.8m.
Increases to trip pay, pensionable from year 1.
When you add in increases to trip pay, pensions and tax, the figure is about £9.5m. This figure is very much in line with recent investments the company has made to other key areas. Or put another way it is substantially cheaper than the £26m it will cost to ground the airline for a three day's.
Good luck Mr Boyd.
WDMM