Fly safe, fl y well Annual Report & Financial Statements Our vision is to become the Contents travel company most loved Our purpose 04

Chairperson’s statement 06

Timeline of 2020 10

CEO Review of 2020 12

CFO Review of 2020 18 Our values Our Key Performance Indicators 24

Creating value for our stakeholders 26 Think Red Sustainability 28

When we think red we connect to the true spirit of Virgin. Risk management 36 Innovation, passion, positivity. From day one we’ve hunted new ways Corporate governance 50 to champion our customers, changing the game with style and a smile. We don’t just push boundaries, we break through them. We Directors’ report 54 are our future and we think about that in every decision we take. Red is us at our blazing best. Directors’ responsibilities statement 57

Corporate structure 58

Make Friends Independent Auditor’s report 60

Financial statements Virgin loves people. It’s how we treat one another that makes us special. We embrace our team-mates, customers and partners. We Consolidated statement of comprehensive income 64 celebrate everyone’s individuality and look for the good in everyone – while following through on what we say we’ll do. And we never Consolidated statement of financial position 65 forget what makes us special. Consolidated statement of changes in equity 67

Consolidated statement of cash flows 69

Notes 70

When you’re a Virgin brand, people expect more from you. So we expect more from ourselves. The small details are as important to us as the grand gestures. We act with the greater good of the business in mind. We’re here to be amazing. Because life’s too short to be anything less.

Pages 6-48 comprise the Strategic Report for the year. Our purpose

Everyone can take on the World

Our corporate purpose reflects both our business activities and our corporate culture of inclusivity, activism and challenger spirit which has defined Virgin Atlantic throughout its existence.

Our promise

To create thoughful experiences that feel brilliantly different, at every opportunity.

4 Virgin Atlantic Annual Report 2020 Chairperson’s statement Chairperson’s statement continued

Chairperson’s statement

2020 was Virgin Atlantic’s 36th year of continuous operation The 2020 financial year was a story of vastly reduced flying, The forecast that all UK adults aged over 18 will have been and the most difficult in the company’s history. Covid-19 ruined prodigious losses, financial restructuring to preserve liquidity, vaccinated by the end of July certainly underpins our optimism lives and devastated economies globally. Aviation has been one and operational restructuring to reduce our establishment in about reopening. Subject of course to that fundamental of the worst affected industries, and within aviation, the long- order to meet the new market environment. assumption, there are real grounds for optimism at haul sector, of which VAA is part, has been the most damaged. Virgin Atlantic. Passenger numbers and revenue fell by 80%. We carried 1.2 For more than 12 months now, we have been locked in a daily million passengers compared to nearly 6 million in the previous We have shown great agility in re-shaping the airline’s operations fight for survival. That we have come so far is due to the great year. Passenger revenue was £446m compared to over £2bn in and transforming the cost base. In 2022, we will make further qualities of leadership shown by our senior leadership team, led 2019. The only bright spot was the performance of our cargo progress towards our ambition to be the most loved travel by Shai Weiss, to the unstinting and brave contributions of all operation which grew revenue by nearly 50% to £319m, a company, while being sustainably profitable. our staff, and to the great support of our partners in business, remarkable achievement in the circumstances. who joined us in a successful and comprehensive solvent On behalf of the whole Board and of our shareholders, I can recapitalisation scheme in September last year. We are now Our response to the crisis involved consolidating flight safely say that the one truly bright aspect of an otherwise planning on the basis of a phased exit to the pandemic in the operations at Heathrow and Manchester, reducing our fleet and dreadful year in 2020 was the performance and commitment second half of the year and a return to profitable operation streamlining all areas of the company, which sadly also included of our people. Whether in work or on furlough, all pulled in 2022. a 41% reduction in our workforce by the end of 2020. together to support each other and the national effort to respond to Covid-19. There is much to celebrate in this prospect, but this celebration The sudden and prolonged restrictions imposed on travel in has to be tempered by our sorrow and great regret for the March 2020 created enormous logistical difficulties for all We worked with the Foreign and Commonwealth Office human cost of our fight for survival. Enormously hard decisions passenger carriers, as literally millions of ticketed passengers to repatriate UK citizens. We partnered with the Department have had to be taken to reduce operations and therefore make sought to re-arrange or cancel flights in a short period of time, of Health and the NHS to transport crucial medical supplies permanent headcount reductions, in order to survive. We are a a contingency for which no operational plan existed. to the UK, including 7,000 tonnes of PPE, test kits and other significantly diminished team as a result. Our thoughts are with medical supplies. those affected, and our great thanks are due to them for their We ourselves refunded 220,000 bookings with more than loyal service. £600m between January and December. As was the case Whilst on furlough, more than 350 cabin crew volunteered to for all operators, we were not able to process the requests work at NHS Nightingale and other hospitals, the ambulance At the end of February 2021, the UK Government published to the timescales normally in force, which we much regret. services and as NHS Volunteer Responders. Now, in the its roadmap to a progressive reopening of the economy and However, we did catch up in the shortest time achievable, due to vaccination phase, our frontline staff with medical training are removal of social restrictions. This roadmap underpins our own extraordinary efforts by the customer teams, and our procedures supporting the vaccine roll-out. plan to restart passenger services at scale in time for the second have been amended, to hopefully avoid a repetition of last half of the year. However, much remains to be done in terms of year’s problems. We also owe great thanks to all our partners in business, our planning to enable travel to resume fully. There are decisions to suppliers and our financiers. The support they have given our be taken about the requirements for Covid testing, passporting The first half of 2021 is all about the continuing fight for survival, efforts to get through the crisis has been outstanding. At Virgin and certification. as most long-haul routes remain closed. We continue to Atlantic, a core objective is to be “best in partnering”; I believe husband resources and to preserve cash. Following the roadmap that the deep trust evidenced by the support of all concerned in Virgin Atlantic is completely focused on delivering a safe, secure announcement on 22 February, we look forward to a second half our restructuring last September is a testament to the value of and healthy environment for our staff and customers, and we year of resumed operations at scale. There is even the prospect, our approach to business over the years. have been working hard to assist Government in formulating if the roadmap timetable is adhered to, of more substantial flight practical and effective measures to deliver this. We will know operations re-starting at the end of May. more in April and May, after the Government’s task force reports.

6 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 7 Chairperson’s statement continued

Chairperson’s statement continued

2020 was a very difficult year for very many company boards, and ours was no exception. I thank all my Board colleagues for their great contribution. I also welcome Klaus Heinemann as independent Board Observer, on behalf of our creditors. Klaus has a wealth of aviation experience, having previously served as CEO of Aercap and as Chair of Finnair. During the year, Tom Mackay, our CFO, and Ian de Sousa, our Company Secretary of more than 20 years, stepped down. We give them our great thanks and very best wishes for the future.

In conclusion, on behalf of the Board and shareholders, I give our most profound thanks and appreciation to every employee of Virgin Atlantic. This has been the hardest year for very many of us and our families, and the spirit and dedication you have displayed is remarkable. Survival depended on it.

Through this dark period, the contribution of the leadership team and the inspiration they have given to us all has been amazing. Shai Weiss our CEO has epitomised the Virgin ethos. He has led by example and by sheer force of character and generosity of spirit, and Shai’s efforts have been matched by his colleagues in leadership. We cannot thank you all enough. Let’s all look forward to better times together, Covid-19 permitting.

Peter Norris

Recent awards Outdoor Virgin Atlantic was voted Britain’s only Global Five Star Airline by APEX – Airline Passenger Experience Association socialising for the fourth year running in the Official Airline Ratings. We also received Diamond status, the highest possible We aren't throwing away standard by APEX and SimpliFlying, for delivering the the rule book, we're just highest standards of cleanliness and demonstrating an taking it on holiday unwavering commitment to keeping our customers and teams safe.

We were named as the Best Airline in Europe, and landed the top spot in four out of the eight categories within the 2020 KAYAK Travel Awards, These customer-rated awards are based on over 20,000 reviews spread across airlines in Europe, including winning Europe’s Best Airline Crew Award. 8 Virgin Atlantic Annual Report 2020 Timeline of 2020

2020: A year like no other

10 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 11 CEO Review CEO Review continued

CEO Review of 2020

The Covid-19 pandemic presents the biggest crisis since the As we started 2020, we were on course to return to profitability, It is worth highlighting some of the key events in 2020 which We optimised the network and simplified the fleet through the Second World War, affecting public health, economies and a year ahead of plan. This followed a foundational year in have had a lasting impact on our Company. early retirement of three Airbus A340s and seven Boeing 747s. communities globally. Aviation was one of the first industries to 2019, the first year of Velocity; a three-year plan to remove the We consolidated flying at London Heathrow and Manchester, be affected and will be one of the last to fully recover. Despite impediments that prevented customers from flying with us and The first business casualty of the crisis was our investment in with the ambition to rebuild at Gatwick as demand returns. facing the most challenging year in our 36 year history I am translating preference for our brand and service into purchase. Flybe, which entered administration on 5 March, despite the proud and humbled to have led Virgin Atlantic’s response to Returning to profitable growth through an expanded network, efforts of all involved to turn Europe’s largest regional airline We announced plans for the Company to operate under a single the crisis. improving corporate relevance and continuing to delight our around. The impact of Covid-19 on Flybe’s trading meant it was brand, with Virgin Holidays becoming Virgin Atlantic Holidays, customers with the best in class end to end journey experience, unable to secure a viable basis for its continuing operation. As meaning that for the first time ever, all our revenue generating Since February, we have been guided by the single mission whilst keeping our cost discipline. a 30% shareholder in the Connect Airways consortium that activities – airline, holidays and cargo - will be consolidated of ensuring Virgin Atlantic’s survival, so that we can continue acquired Flybe in January 2019, this was a devastating outcome. under single leadership to drive a 10x growth mindset when to serve our people, customers and communities for decades Our expanded joint venture with Delta and Air France KLM But with the impact of Covid-19 intensifying on airlines around recovery begins. to come. It was only achieved through a laser focus on launched in January 2020, creating a $13bn transatlantic the world, it was right to focus efforts on ensuring Virgin Atlantic reducing our costs, preserving cash and protecting as partnership of choice for millions of people and businesses. But was in the best possible position to weather the storm. Our actions in 2020 delivered more than £300m of cost many jobs as possible. as events began to unfold, on 1 February, when we took the reductions and reduces our fleet capex by £880m over the next decision to suspend our flights between London Heathrow and On 16 March the US closed its borders to the UK, already having five years, culminating in the completion of a privately funded, Undoubtedly the airline has undergone a transformation that Shanghai, few could have predicted the scale of the global crisis closed them to Schengen countries. A year later and these solvent recapitalisation of the airline on 4 September. Through no one could have predicted at the beginning of the year and that we would witness. restrictions remain. On the same day, the UK Government a court sanctioned Restructuring Plan under the new Part 26A it has come at a huge cost to many of our people, with nearly 1 advised those who could work from home to do so. With the of the Companies Act 2006 and with the unanimous support in 2 jobs lost. But as demand for travel returns, which it will, it’s health, safety and security of our people and customers our of our shareholders and creditors, we delivered a refinancing our greatest hope that we will be able to welcome many of our number one priority, a large proportion of Virgin Atlantic’s package worth £1.2bn. amazing former colleagues back. workforce has operated remotely since 17 March. With our place of work a plane and our unit of time a flight, many of our front- line teams continued to travel into work including our pilots, crew, engineers and those in operational or safety critical roles.

On the 23 March, the UK entered its first national lockdown, and, on the same day, we launched our first cargo only flight, bringing PPE from Shanghai, to support our NHS on the frontline. From 21 April, for a period of 90 days, Virgin Atlantic passenger flights were grounded, and our cargo operations became the primary revenue driver of the airline. The determination and resilience of our teams making this happen provided a much-needed lifeline.

Our vision remains to be the most loved travel company and a sustainability leader in our industry but the path to achieve it has changed. On 5 May we announced plans to reshape and resize Virgin Atlantic, including a planned reduction of 3,150 jobs across all functions.

12 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 13 CEO Review continued CEO Review continued

CEO Review of 2020 continued

This included shareholder support of c.£600m over the life of In December, we launched three new services to Pakistan: To do so, we increased our service teams five-fold and the business plan to 2025, £170m of secured financing from London Heathrow to Lahore and Islamabad and Manchester introduced automation to improve efficiency. By the end of Davidson Kempner Capital Management LP and more than to Islamabad. In November, we announced a new service from November, we returned to normal operations in line with our £450m of support and deferrals from creditors. Again, this came London Heathrow to St Vincent, launching in Summer 2021, commitment to customers. I want to thank our customers for with a devastating impact on our people as we announced a making Virgin Atlantic the first European carrier to offer direct their patience and support and our people for their dedication to further reduction of 1,150 jobs. flights to St Vincent. With a strong heritage in premium leisure, getting us back to our very best. Virgin Atlantic now has one of we are well positioned to capitalise on leisure demand as travel the most flexible booking policies in the industry. During Q3 we saw a recovery in passenger flying, with industry at scale returns. leading measures in place for our people and customers through For all new bookings for travel up to 30 April 2022, or those with our innovative Fly Safe, Fly Well programme. Despite the Record year for cargo. Against a volatile outlook for a cancelled flight up until 31 August 2021, our customers can amazing advancements in vaccine development, following a international travel, our cargo team has delivered a record make as many free of charge changes to their travel dates, origin rise in Covid-19 cases in the UK, restrictive tiers were introduced performance. Utilising our passenger configured Boeing 787s or destination as needed, until 30 April 2023. in mid-October, followed by a second national lockdown from and Airbus A350s, they operated nearly 4,000 cargo only 5 November. sectors, carried more than 7,000 tonnes of PPE and delivered Fly Safe, Fly Well. The health, safety and security of our people £319m in revenues, a 49% increase on 2019 performance. and customers is our number one priority. Always. As passenger These were further tightened on 20 December, including a flying resumed in July, we put in place a robust and industry ban on non-essential travel. With tiered restrictions in force for Although overall tonnage declined 32% from 227m in 2019 to leading programme to ensure peace of mind for our passengers much of the UK in Q4, our teams responded quickly, removing 156m tonnes in 2020, contribution increased 148% to £261m due whilst retaining the Virgin Atlantic service we are known for. passenger flying and replacing it with cash contributing to improved yield. With our Pharma Secure product launched cargo operations. in Q4 and our state-of-the-art purpose-built cargo facility at Across the customer journey, we reduced the physical touch London Heathrow, we expect growth to continue into 2021 and points, from check in at the airport to food and beverage service 2020 ended with the realization that recovery would take longer eventually support global distribution of vaccines. on board. We introduced anti-bacterial fogging, increased and that Virgin Atlantic, like the rest of the nation, would face the frequency of cleanliness checks throughout our flights, further challenges through a tough winter. In December, at the Virgin Atlantic Holidays performance mirrored the airline. required masks on board and ensured each passenger received same time many of us faced increased restrictions on our day With UK restrictions on non-essential retail in place for much a personal hygiene kit for their flight. Our Covid-19 insurance for to day lives, the UK approved the Pfizer/BioNTech and Oxford/ of 2020, the Virgin Holidays retail estate has remained largely all new bookings was the first in UK aviation and we led from the AstraZeneca vaccines. This reignited hope of a turning point in closed since March. In May 2020, 7 of the Vroom stores closed front on testing for our crew and passengers. the fight against Covid-19 as we entered 2021. permanently. Having started the year with 55 stores, we ended the year with 50 (36 Next concessions and 14 Vrooms). Revenue Throughout we have been at the forefront of innovation and Performance in 2020. A year like no other declined 85% to £96m (down from £627m), with customer advancements to improve and evolve in order to deliver the We witnessed dramatic year on year declines in key numbers at 58,500, falling 85% on 2019. At a Group level, Virgin safest flying experience possible. From 1 October, we introduced performance metrics, with revenue and passenger numbers Holidays contributed £18.3m of flight revenue and £8.7m of hotel pre-departure rapid LAMP testing in place for our crew on 80% below 2019. ASKs were 73% down on 2019 – driven by the and ancillary margin. certain routes. A first in the UK. In December, we trialled reduction in passenger flying, smaller average fleet gauge and outbound, rapid pre-departure testing for our customers and, substantial cargo only flying. As a result, sectors did not fall as Our Customers. For our customers who did not take to the since 18 January 2021 every single passenger and crew member materially, reducing from 23.5k to 10.6k (or 45% of 2019 levels). skies in 2020 due to cancellations caused by Covid-19, it was is tested pre-departure. a challenging period and one where we did not live up to our Agility in passenger operations. Our passenger flying brand promise. The huge volume of refund requests at the programme in 2020 was subject to constant change in line height of the pandemic, combined with constraints on our with ever changing global travel restrictions. Throughout 2020 teams and systems during that period, lengthened our we pivoted passenger flying to serve VFR (visiting friends and processing times. In 2020, our customer service teams dealt relatives) and leisure markets, particularly the Caribbean, India with more than 220,000 requests across our Airline and and Nigeria. Holiday businesses and refunded over £600m.

14 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 15 CEO Review continued CEO Review continued

CEO Review of 2020 continued

Accordingly, our customer satisfaction scores as measured Survival. Throughout this crisis we have been an industry In February 2021 Virgin Red launched a true lifestyle loyalty Over the last 14 years, we have transitioned to a cleaner,

by Net Promoter Score (NPS) reflected the measures we first mover. The actions taken in 2020 to reduce costs, preserve programme in the UK which, alongside the strength of our greener, twin-engined fleet; reducing our CO2/RTK by 18% put in place, increasing five points on 2019 from 46 to 51. 1 In cash and operate cash positive flying have given us a runway transatlantic joint venture with Delta and Air-France KLM, between 2007-2019. In 2020 we retired the last of our four- December, we were awarded 2021 APEX 5* Global airline rating into the summer. With the earliest date for the resumption of expands our network reach and improves corporate relevance. engine aircraft and our current, simplified fleet is forecast to for the fourth year in a row, making us the only British airline to international travel at scale now 17 May, we have taken further be 10% more fuel and carbon efficient per km flown when achieved this milestone. Maintaining this rating during the most steps to bolster our cash position. On 15 March 2021 we agreed Becoming most loved compared to our fleet profile in 2019. In 2021, we will renew our challenging year in our history is testament to the efforts of our further financial support from our shareholders and Our vision to become the most loved travel company comes focus and energy on industry thought leadership and innovation teams on the ground and in the air, to delight our customers creditors, to the tune of £160m and we remain confident with great responsibility and goes beyond providing best in class to achieve meaningful change in the years ahead. every single day. We are especially honoured to have been in Virgin Atlantic’s survival. service to our customers. As an airline we bring huge social and awarded the Diamond status by APEX Health & Safety powered economic benefits to the economies and societies we serve. The A big red thank you by SimpliFlying for our comprehensive set of multi-layered Love. In 2021, we must get back to our best for our people and need to go further, to serve our people, the planet on which we 2020 has been a year like no other and devastating for so measures offering the highest standards of health protection. customers. Rebuilding trust and confidence in our brand and all live and the communities in which we operate, is unabated by many. Without a doubt, it has been the toughest year in Virgin reassuring our customers to fly safe, fly well. the pandemic. Atlantic’s 36-year history. Yet, for all its hardship, 2020 has Survival, love, profitability produced some exceptional moments to be proud of. In many As global economies emerge from Covid-19, Virgin Atlantic has Profitability.The impact of Covid-19 on global aviation will be Our people remain our secret sauce and the thing that sets us ways we have made the impossible, possible. I have been a vital role to play in the UK’s economic recovery and a future felt for many years to come, with demand unlikely to return to apart. For our crew and pilots, we have put in place an innovative inspired by amazing people of Virgin Atlantic. By their heroic Global Britain. Supporting vaccine distribution, global supply 2019 levels before 2023. Yet, for Virgin Atlantic, the outlook is holding pool structure for 1,780 colleagues. This means that as efforts, extraordinary commitment to our survival, our customers chains and safely flying our customers to the places they love transformative. A 10x mindset to revenue growth underpins our demand returns and we scale up our flying programme, we are and each other. A special thank you to my leadership team, to travel as soon as they are ready to take to the skies. The commercial plan to regrow revenues to 2019 levels by 2023. able to welcome back as many of our people as possible. The our partners and shareholders for their unwavering belief, only way for Virgin Atlantic to survive 2020, was to resize and Powered by technology transformation, digital first retailing and desire to see them back with us keeps us going. determination, and camaraderie. reshape so that we can emerge as a sustainably profitable airline a right to win in a leisure led recovery. By 2022 we expect to from 2022. We went further than most. In 2021, achieving our fly more sectors than in 2019 with efficiencies across our fleet, In 2019, we launched our Passport to Change programme Our purpose has never been more relevant – everyone can take vision to become the most loved travel company, is anchored on network and non-fuel costs delivering more than £200m of working with local schools in our community to promote studies on the world. We are facing up to the challenge, and as a team three critical missions: survival, love, profitability. recurring fixed cost improvement. in Science, Technology, Engineering and Maths (STEM). In 2020, we will continue do whatever it takes to ensure our airline keeps following events related to the WE Charity in Canada, proudly flying. we mutually agreed to terminate our partnership.

In 2021, we will be relaunching our Passport to Change Shai Weiss programme. With over 100 active volunteers at Virgin Atlantic Chief Executive Officer and many more who have registered their interest, we know our 26 March 2021 people are passionate about improving the opportunities for all We fly for a our communities.

In 2020, we continued on our path to become a sustainability million reasons, leader, becoming a signatory of Sustainable Aviation’s commitment to Net Zero by 2050. In July we also became a you only member of the Jet Zero Council, a dynamic partnership between the UK Government and industry focused on developing UK capabilities to deliver net zero emission commercial flying need one through the acceleration of sustainable aviation fuel and supporting zero emission aircraft R&D.

1 Based on a sample size of 104,000 responses (c.25% compared to 2019).

16 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 17 CFO Review CFO Review continued

CFO Review of 2020

Our financial results for 2020 are a stark reflection of the Overall, this resulted in an operating loss before exceptional • One brand focus: The planned unification of Virgin Holidays Financial results & Key metrics immense challenges that the airline industry has faced from items of £514m, £586m worse than 2019, and a statutory loss under one master brand as Virgin Atlantic Holidays will deliver the COVID-19 pandemic. IATA predicts the airline industry to before tax of £858m, £794m worse than 2019. an aligned brand to customers and enabled efficiencies across £m 2020 2019 lose $118bn in 2020 with global passenger demand down by marketing and operations; and 66%. Demand across the transatlantic, which made up 70% At 31 December 2020, the Group’s financing consisted of total Revenue 868 2,927 of Virgin Atlantic’s capacity in 2019, is estimated to have been cash balances of £191m (including unrestricted cash of £115m) • Cr ew productivity: We negotiated ground-breaking EBITDA1 (260) 340 down by 77%.1 compared to £449m at the end of 2019. After the year end and agreements with our pilot and crew unions providing the EBIT1 (511) 74 during Q1 2021 further financing has been secured leading to foundation for enhanced operational stability and productivity. 2 The year had started on plan with January and February in line c.£200m of additional cash support for the business throughout PBTEI (659) (22) with targets. From March onwards the pandemic had a dramatic 2021. This comprises proceeds from a sale & leaseback in Privately funded, solvent recapitalisation EBIT margin (%)1 (59) 3 impact on passenger operations. The closure of US borders January of two Boeing 787s and further support from our largest The completion of the privately funded, solvent recapitalisation Loss for the year (864) (55) combined with the UK entering its first lockdown in March led creditors, underpinned by £97m of further shareholder support. of the airline on 4 September delivered a refinancing package to the temporary cessation of passenger flying from 21 April to worth £1.2bn with a further £880m reduction to fleet capital 20 July. Q2 ASKs fell to 0.2bn, a drop of 99% on the prior year. Resizing and reshaping Virgin Atlantic expenditure. The key elements comprised: Total sectors 10,601 23,551 Despite passenger flying recommencing in July, ASKs for the Significant action was taken throughout 2020 to reduce the Cargo only sectors 3,897 0 second half of 2020 dopped by 87% vs 2019 as demand for cost base and position Virgin Atlantic to become sustainably • Shareholder support of c.£600m over 2020-25, including international travel remained highly constrained due to travel profitable once passenger demand recovers. Actions reduced a £200m investment from Virgin Group and c.£400m of ASK (km bn) 13.04 48.83 and border restrictions. Full year passenger revenue fell to operating costs by more than £300m and include over £200m deferred shareholder payments; Passengers (000) 1,192 5,877 £446m, 80% lower than the prior year and passenger numbers of recurring fixed cost savings. The key actions taken comprised: Load factor (%) 61.1 81.1 fell to 1.2m, 80% lower than the prior year. • £170m of secured financing from Davidson Kempner Capital • C onsolidated network: Consolidation of flying at London Management LP, a global institutional investment management PRASK (p) 3.18 4.27 Despite the challenging passenger demand environment our Heathrow and Manchester while retaining the flexibility to firm; and Cargo business thrived and played a vital role in bringing critical restart Gatwick operations as passenger demand returns. medical supplies to the UK. Cargo revenue grew to £319m, up As well as reducing costs this will improve Heathrow slot • More than £450m of additional deferrals from our largest Passenger revenue 49% on the prior year. Total revenue fell 70% on the prior year and aircraft utilisation, improving future profitability. creditors alongside the support of our credit card acquirers Passenger revenue declined 80% to £446m from £2.2bn in to £868m. (Merchant Service Providers). the prior year, driven by passenger numbers falling 80%. The • Simplified fleet: As part of a rationalisation of the fleet we revenue decline followed the temporary cessation of passenger The scale of revenue reduction and speed at which it occurred retired all our 4-engined aircraft and brought forward the Refunding our customers services on 21 April. Passenger services restarted 90 days later forced an immediate shift in priority during February to retirement of an A330-200. This reduced our fleet from 45 to The customer refund situation in the early summer was on 20 July, and July to October saw gradual month on month preserving liquidity. Throughout the year this was achieved 37 aircraft, through the retirement of 7 Boeing 747-400s and unprecedented, with our customer teams receiving over growth in passenger flying. The UK lockdown in November and through: (1) Disciplined capacity management ensuring only 3 Airbus A340-600s and the arrival of 3 more fuel efficient 10,000 queries per day, and refund requests reaching 10 times tightening of travel restrictions during December saw passenger flights contributing positively to cash were flown, (2) Reducing A350-1000s. Looking forward we will operate the level experienced at any time before the pandemic. Our flying reduce again. Despite the reduction in passenger demand fixed costs and capital expenditure through taking bold and one of the youngest and most fuel efficient long haul fleets response was to massively increase the team to over 240 people three new routes were successfully launched in December from decisive actions to reshape and resize Virgin Atlantic, and in the sky. in 8 countries, as well as offer a market-leading flexibility and London and Manchester to Pakistan. (3) Reducing cash burn and raising new capital through the incentives programme, which saw over 40% of airline customers privately funded, solvent recapitalisation of Virgin Atlantic. • Reduced headcount: Over the course of the year we reduced choosing to rebook on to future flights. We processed more than Passenger reductions were seen across the network with UK-US Together these actions helped reduce overall costs, before our total headcount by 41% to 5,907 at year end, while £600m in cash refunds relating to over 220,000 claims. routes down 83% and UK – Non-US routes down 72%. UK- exceptional items, by £1,473m to £1,382m and raise £370m retaining a holding pool structure for nearly 1,800 pilots and Caribbean routes saw strong demand in the autumn between of new financing, drawn in September. The 80% reduction crew in preparation for the resumption of significant flying the periods of UK lockdown however passengers were down in passengers drove an unprecedented increase in customer activity anticipated in mid-2021. Headcount reductions were 70% for the full year. refunds with more than £600m of refunds processed felt across the company with non-customer facing and during the year. management headcount reduced by 30%.

1 Source: IATA & Oxford Economics, Air Passenger Forecast 1 Earnings before interest, tax, depreciation and amortisation and before exceptional items. 2 Profit before tax and exceptional items.

18 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 19 CFO Review continued CFO Review continued

CFO Review of 2020 continued

Cargo revenue A charge of £105m relating to the closing of out-of-the-money Result for the year Our Cargo operations were the standout performer of the fuel price protection hedges, put in place in 2019 to cover The statutory loss after tax for the year was £864m, £809m year, with revenues up 49% to £319m. The revenue performance expected levels of 2020 flying, was partially offset by foreign less than 2019. EBITDA loss for the year was £260m, £600m reflected a significant shortage in capacity within the global exchange and unrealised fair value movements; the net £81m lower than the prior year, and EBIT loss for the year was £511m, air-cargo market. As the no.2 cargo operator from London charge (2019: £37m credit) was recognised in exceptional £585m below 2019. Heathrow, we were able to service a broad range of customers items in the income statement, consistent with our usual with scheduled cargo-only flights on key existing routes such accounting policies. The reported Group loss before tax, equity-accounted Restated as Shanghai, Hong Kong and our US destinations. investees, exceptional items and fair value movements totalled 2019 2018 Aircraft costs £659m, compared to a £22m loss in 2019, together with an Net cash from operating activities 217 256 We also added new routes including short haul destinations Aircraft and engineering costs together totalled £258m, £91m exceptional charge of £189m (2019: £32m charge). These are Net cash used in investing activities (558) (201) in Norway and Belgium. Our pharmaceutical capabilities were lower than the prior year. Aircraft costs fell £15m to £158m made up of £78m of Covid-related exceptional costs and £111m Net cash from/(used in) financing enhanced with the launch of Pharma Secure, a new product due to the reduction in the size of our fleet. Engineering and of other exceptional costs. These include £7.8m relating to the designed specifically to cater for the growth in vaccine maintenance costs of £100m were significantly lower than write down of loans made early in the year to Flybe including activities 317 (92) distribution. the prior year, reflecting both reduced flying hours and the an offset for post-administration recoveries. Net decrease in cash (25) (37) retirement of the oldest aircraft in our fleet. Effects of exchange rate differences (15) 32 Unit price metrics rose on average by 130%, and freight charter Balance sheet, cash flow and financing Cash at the end of the year 449 489 flights made up 20% of our cargo operations. Although overall Other non-fuel costs Restricted cash 97 97 traffic declined 25% on the prior year due to a significant Non-fuel, non-aircraft costs of £835m, were 54% lower than the Free cash 353 392 decline in belly capacity on passenger flights, traffic per prior year. Within this, employee remuneration of £277m was £m 2020 2019 sector increased significantly to 14 tonnes. £145m lower than the prior year, reflecting the in-year savings Cash from operating activities (713) 217 from our restructuring programme which saw headcount at Cash used in investing activities (23) (558) Virgin Holidays 31 December of 5,907 compared to 10,016 at the beginning Virgin Holidays revenue fell 85% to £96m reflecting the of the year. It also reflects employee participation in the UK Cash from financing activities 472 317 restrictions on non-essential travel present for much of 2020. Government’s Coronavirus Job Retention Scheme (CJRS) of Cash decrease (272) (25) With Holiday departures declining 80%, holiday distribution, £70m. The reduction in other operating and overhead costs of Effects of exchange rate differences 15 (15) marketing and selling costs were similarly reduced, and the £149m vs £176m in 2019 reflect the in-year actions on our fixed operations were streamlined as part of the single brand costs such as indirect staff costs and volume-based reductions unification programme, with Virgin Holidays due to become in operating costs. Unrestricted cash 115 353 Virgin Atlantic Holidays. The retail store network was also reduced by 5 stores as part of the restructuring and totalled Finance costs Total cash 191 449 50 stores at year end. Net finance costs of £148m were £52m higher than in 2019. This was mainly driven by a £27m increase in finance lease interest Debt (2,479) (2,215) Fuel costs and £12m increase in interest payable on external debt. Physical fuel costs of £185m were down £502m, reflecting the Net debt (2,287) (1,766) significant reduction in sectors flown and the retirement of our Net (liabilities) (576) (190) 4-engined aircraft. Throughout 2020 the operation focused on flying fuel-efficient Airbus A350 and Boeing 787 fleets to minimise fuel costs and maximise cash contribution on cargo and passenger flights.

20 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 21 CFO Review continued

CFO Review of 2020 continued

Adjusted balance sheet metrics Long-term borrowings rose as a result of the recapitalisation Escape pass and deferral of items previously classified as short-term borrowings, including the conversion of the existing RCF to a £m 2020 2019 term loan. Deferred revenue fell, reflecting lower flying activity and reduced future bookings due to the continued uncertainty Reported net (liabilities) (576) (190) over Covid restrictions on international travel later in the year. We aren't throwing away Slot portfolio valuation (fair value, less cost) 423 350 A portion of our long-term borrowings are secured against our Adjusted net (liabilities)/assets (153) 160 UK slot portfolio which had a year-end market value in excess the rule book, we're just of £500m. taking it on holiday Reported free cash 115 353 Outlook With the recently announced path to exit UK lockdown Unremitted cash 13 70 restrictions, there is a roadmap to recovery and to the Adjusted free cash 128 423 recommencement of international passenger flying at scale. Factors such as the emergence of new variants of the Covid-19 virus and the risk of a third wave of infections continue to Cash at the end of the year totalled £191m vs £449m in 2019, create significant uncertainties and Virgin Atlantic is not able to including £77m (2019: £97m) of restricted cash, but excluded provide certainty that there will not be a more severe downside £14m of unremitted cash which is recognised within our recovery scenario. receivables balances. The decrease reflected the significant cash outflow resulting from refunds and operating activities In the event that such a scenario were to occur, Virgin Atlantic of £716m, partially offset by new borrowings of £591m. would need to take further actions and would likely need to Cash from operating activities was an outflow of £713m secure additional funding beyond what has been achieved to and was driven by the £260m EBITDA loss and refunds. date, however certainty that it will be able to achieve further funding cannot be provided. Please see note 3 ‘Basis of Net cash used in investing activities of £23m reflects the success preparation’ for more information. of the strong cash control measures put in place early in the year, together with the proceeds of the disposal of our Crawley- While material uncertainties remain as to the timing and shape based facility, The Base. Within the fleet, we acquired an of recovery, the actions taken in 2020 to reshape and resize additional A350, while a further 2 A350s joined the fleet Virgin Atlantic have positioned the airline to capitalise on the under leasing contracts. recovery when it takes hold. The discipline and focus on cost

and liquidity management will continue, to help ensure Virgin Cash inflow from actions taken in the year totalled £456m Atlantic’s survival and return to profitability. relating principally to new borrowings of £591m from the recapitalisation programme described earlier, offset by £100m of repayments, principally relating to aircraft leases. Oliver Byers Movements within the balance sheet principally reflect Chief Financial Officer the various actions undertaken as part of our solvent 26 March 2021 recapitalisation.

Shareholder payment deferrals over the period 2020 to 2025 were recognised through a £376m preference share issuance and are reflected in the capitalisation of intangible assets relating to contracts. The increase in long term payables is also a result of revised repayment terms on contracts with both shareholders and with lessors.

22 Virgin Atlantic Annual Report 2020 Key Performance Indicators Key Performance Indicators continued

Our Key Performance Indicators

Key performance indicators 2018 2019 2020 YoY Virgin Holidays The directors have outlined below the key performance Our business model indicators that they rely on to manage the business. These key Load factor (%) 78.7 81.1 61.1 -20.0pts 2018 2019 2020 YoY Virgin Atlantic Limited comprises three principal lines metrics focus on volume, efficiency and cost performance within An industry standard capacity utilisation measure that assesses of business: Virgin Atlantic Airlines, Virgin Atlantic Cargo our business operations. The financial indicators are stated at Total customers (‘000) 397 390 59 -85% how efficiently we fill our aircraft seats. Calculated as the total and Virgin Holidays. constant currency. number of passengers divided by total available seats. A key measure of volume and activity which drives holiday revenues. Calculated as the total number of customers served Virgin Atlantic Airlines uses a mixed fleet of Airbus and Virgin Atlantic in the year, across all holiday types. Boeing aircraft to carry passengers to destinations across 2018 2019 2020 YoY 2018 2019 2020 YoY North America, the Caribbean, Africa, the Middle East and Asia from its main bases in London and Manchester, Passenger numbers (m) 5.5 5.9 1.2 -80% Fuel CASK (p) 1.45 1.44 2.22 +54% 2018 2019 2020 YoY with award winning clubhouses at 7 airports. A key volume measure used to assess volume growth and A key fuel metric, Fuel CASK (p) measures our unit fuel spend Contribution (£m) 5.8 5.5 (39.2) n/a relative market share. Calculated as the total number of and assesses our aircraft fuel efficiency and fuel hedging Virgin Atlantic Cargo trades and retails the bellyhold This represents the operating margin achieved by the Holiday passengers who flew on Virgin Atlantic Aircraft. effectiveness. Calculated as the total fuel spend divided by capacity of Virgin Atlantic’s cargo-friendly fleet, business from its travel and package holiday operations. total ASKs. connecting manufacturers, growers, retailers and Calculated as the profit before tax and exceptional items consumers across the globe. It has the ability to transport (PBTEI) contribution. specialist and time-critical cargo ranging from the 2018 2019 2020 YoY 2018 2019 2020 YoY most temperature-sensitive pharmaceuticals and fresh produce to a beloved family pet. ASK (km m) 47,747 48,832 13,043 -73% Non-fuel CASK (p) 3.49 3.39 7.72 +128% Virgin Atlantic Cargo

An industry standard measure of passenger carrying capacity. Our key volume-adjusted operational cost metric that Virgin Holidays offers predominantly package holidays 2018 2019 2020 YoY Calculated as the number of available seats in each flown indicates our cost control performance excluding fuel. to destinations worldwide for customers principally in sector multiplied by the sector distance in km. Calculated as the total operational costs and overheads Tonnage (m) 244 227 156 -31% the UK. It has significant market positions in holidays (ex-financing costs) divided by total ASKs. to major US destinations including Florida and to the Utilisation of bellyhold cargo capacity helps drive overall Eastern Caribbean. The business offers holidays through profitability of the airline. Calculated as the revenue online, call centres and retail stores across the UK. generating chargeable weight carried on VA Cargo’s Over 90% of Virgin Holidays customers also fly on network measured in kg. Virgin Atlantic planes. 2018 2019 2020 YoY

PRASK (p) 4.12 4.27 3.18 -26% 2018 2019 2020 YoY

An industry measure of operational efficiency that Yield (£/kg) 0.92 0.94 2.05 +118% encompasses both passenger yield and load factor performance. Calculated as the total passenger revenue Used to measure revenue performance (£) per kilogram divided by total ASKs. carried on VA Cargo’s network. It’s a measure of pricing execution that has a direct impact on the overall profitability of the business.

24 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 25 Stakeholder engagement Stakeholder engagement continued

Creating value for our stakeholders

Our people In 2020: Covid-safety and the impact of changing Government How we engage: We seek to have open and constructive How we engage: Our Passport2Change programme focuses At 31 December 2020 we had over 5,900 people based in the travel guidance has been of huge concern to our customers and relationships across our supplier network as they are integral on outreach into schools near our main operations centres to UK and in key destinations around the world. Of this, 9% were we put in place a range of measures to address these. Our ‘Fly to our ability to serve our customers. We have a structured help inspire the next generation, particularly on STEM skills. We pilots and 41% cabin crew. Safe, Fly Well’ programme ensured a highly bio-secure on-board supplier relationship framework, and identified relationship supplement these actions with charitable and business network environment; we provided flexible booking policies and greatly managers for key suppliers. Supplier’s policies and standards are activities in many of our locations and holiday destinations. How we engage: We promote a transparent, two-way increased the resources in our call centres and programmes to regularly reviewed to ensure they align with our supply chain multimedia communication approach with our people, utilising respond to requests for flight changes and refunds. We worked sustainability criteria. In 2020: This included supporting pupil home-schooling through an enterprise social media platform; Workplace from Facebook. closely with our corporate and travel trade customers to ensure the donation of laptops to local schools. Workplace provides an open forum where over 96% of our close dialogue as we navigated the changing landscape. In 2020: The importance of our strong supplier relationships people regularly contribute, keep up to date on the newsflow was critical as we worked together to manage our response Finance Partners of the company, and can engage in discussions with their As a result we increased flexibility through our commercial to the Covid-19 pandemic, our solvent recapitalisation and our We have close relationships with a range of finance capital colleagues and leaders. This includes a highly active ‘Ask Shai’ policies ensuring we maintained demand for future travel and restructuring, which encompassed reducing costs and reflecting providers and counterparties, including banking and credit card CEO Q&A group, regular Workplace Live town hall broadcasts, now we continue to work closely as traffic restarts in 2021. We lower demand for flying. Discussions ranged from managing providers, aircraft and airport slot financing investors. and check ins with our people through a fortnightly pulse survey. also enhanced the flexibility and support offered to our most new aircraft delivery schedules with Airbus through to the rapid We engage in formal communications with our people through loyal customers through our Flying Club offering. Our customer development of the new bio-secure on-board catering service. How we engage: Our treasury team maintain regular contact trade union and employee committee representation. satisfaction scores for safety were significantly higher than the Our cargo business built new and deeper relationships as it with all our finance partners, providing updates, commentary prior year reflecting our efforts to keep customers safe when expanded its operations to new cities and new industries. and information on specific issues and financial performance on In 2020: Effective communication with our people has been flying with us, and recognised across the industry by the APEX request, as well as press releases on key newsflow. critical given the uncertainty of the pandemic and the impact ‘diamond’ status health & safety award. Industry peers on sustainability goals and other industry issues it has had on all our working and personal lives. We have We participate in a number of national and international In 2020: We have undertaken regular and significant provided a wide range of support for employees’ Covid-safety in Joint Venture partners and other airline partners associations, including IATA and Sustainable Aviation, where engagement with our financing partners who have provided particular, and their physical and mental well-being, regardless of Our airline partners include the expanded Joint Venture with collaboration enables the development of industry-wide very substantial support through the most challenging year in work location. We have been very conscious of the challenges of Delta, Air France and KLM, together with 70 codeshare and approaches to key issues such as sustainable aviation fuel and Virgin Atlantic’s history. We engaged with all our creditors as homeworking, home-schooling, and periods where many of our interline partners. carbon offsetting as well as trade and consumer issues. part of the solvent recapitalisation and worked with them to team were on furlough, while others were working intensively to achieve a court-approved restructuring. We have welcomed an respond to the rapidly changing environment. How we engage: Our Partnership with Delta is in its 7th year, How we engage: We seek to take an active and thought independent VAA Board Observer representing our creditor and in 2020 we formed a new expanded Joint Venture with leadership role in the industry associations we participate groups, and provide regular updates to all our financial partners. We conducted extensive consultations as part of the Delta, Air France and KLM. This relationship is active at in. We also work to embed best practice and responsible restructuring exercises including discussion with the recognised every level in the organisation ensuring that we have strong behaviour across our business and supply chain in partnership Regulators and governments unions; worked to minimise the impact on our people; operational and strategic engagement throughout. with RoundTable on Sustainable Biomaterials, World Cetacean We are regulated by the Civil Aviation Authority and engage and assisted those looking to find roles elsewhere with a Alliance and The Sustainable Restaurant Association. with governments, policy makers, airline associations and comprehensive redeployment programme, including supporting In 2020: We were able to collaborate effectively with our tourism bodies. the NHS Covid-19 care and vaccination programmes. partners Delta, Air France and KLM on both operational and In 2020: We supported a number of industry initiatives, both strategic matters. We focused on ensuring that our collective on responding to the Covid-19 pandemic, and also on longer How we engage: Our government affairs and operations teams Customers customers were and continue to be able to experience term aviation sustainability goals. We are an active participant in are in regular and close contact with relevant regulatory bodies Our customers are at the heart of everything we do. We served aligned customer journeys despite the rapidly changing travel the UK Government’s Jet Zero Council and its working groups, and across UK Government departments. We are highly active over 1.2 million passengers and significantly increased our Cargo environment. We have worked closely on our network plans which are seeking to support the development of frameworks in engaging with governments, policy makers, regulators and customer base to over 430 major customers. and preparations to recommence travel at scale across the and initiatives to accelerate the availability of commercially political stakeholders on issues which impact our ability to transatlantic, and navigating the challenges that Covid-19 has viable and scalable sustainable aviation fuel. operate, reputation, and are important to our customers. How we engage: Virgin Atlantic has built its reputation on bought to the airline industry. unique and individual customer experience and engagement. Communities In 2020: This was primarily related to Covid-19 and subsequent As well as our people’s direct personal engagement every day, Suppliers We engage with the local communities in each major location global travel restrictions. We engaged with stakeholders on we listen to our customers through a range of satisfaction and Our key suppliers include airframe and engine manufacturers, we have a presence, including local schools, business groups and customer refunds and restart issues such as quarantine, travel market research surveys, with NPS scores being a key measure airports and specialist airside support and critical technology community organisations. corridors, new health and safety protocols, the Test to Release of success used across the company. suppliers, together with over 20,000 suppliers worldwide. scheme, and other operating restrictions.

26 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 27 Sustainability Sustainability continued

Sustainability

Overview The loss of jobs affected every level of the organisation, from our Given the impact of Covid-19 on our passenger flying programme We were the first UK airline to introduce rapid pre-flight Covid-19 Becoming the most loved travel company comes with huge cabin crew and pilots, our engineers and airport staff, through in 2020, our direct workforces, particularly cabin crew and pilots, testing for our crew and pilots from October, supported our responsibility. A responsibility to our people, our customers, the to our back office and leadership team. Across our workforce, have been widely impacted. As passenger demand returns and ground teams through regular Covid testing, undertaking over communities we operate in and the planet on which we all live. It the devastating impact of Covid-19 and the loss of livelihoods, we retake to the skies at scale, we hope to welcome back as 7,000 tests by the end of the year. Our onboard protocols and pervades everything we do and how we do it. colleagues and friends affected everyone working at many of our former colleagues as possible. To make this possible, cleaning were there for the safety of our people as well as Virgin Atlantic. and in conjunction with our union representatives, we introduced customers and we provided comprehensive support to crews In 2020, a year like no other, the Covid-19 pandemic has affected innovative holding pools for many of our pilots and crew. An when travelling and staying overseas. every aspect of our operation and impacted every one of our Throughout the year, our focus was on ensuring transparency in industry first. stakeholders. But the strength of our values to make friends, our redundancy processes, fair treatment of all our people and But our Be Safe, Be Well programme goes beyond just physical think red and be amazing has seen us through the toughest providing support for those placed at risk and/or who sadly left At the end of 2020, we had over 310 pilots and 1,450 cabin crew health and safety. We have established knowledge libraries and year in our history. the airline. in our holding pools. This will allow Virgin Atlantic to scale back virtual toolkits to equip our leaders and managers with wellbeing up as quickly and efficiently as possible, as demand returns. For resources. Encouraging them to reach out to and support their People We put in place a full suite of resources for managers having to our former colleagues, the holding pools provide clarity on how teams, whether in work or on furlough. To raise awareness and resize their teams including comprehensive support to equip and when, they can retake to the skies with Virgin Atlantic, if they understanding around the impact of Covid-19 on mental health them for selection and online interview processes. Ensuring choose to do so. and fatigue, both physically and emotionally. Providing our teams Our people are at the heart of everything we do. Meaning the consistency and fairness for our people. For those placed at risk with digital resources and regular communications to ensure our focus and rigour we apply to our customer journeys is mirrored of redundancy, we developed in house resources to offer support We welcomed the introduction of the Coronavirus Job Retention people remain connected, despite more than a year of remote in our people journeys too. Creating a workplace that is based on for interview, CV and profile building alongside active promotion Scheme (CJRS) in April 2020 and have accessed the scheme working and furlough across the Company. equality of opportunity, recognises each individual and celebrates of internal job boards and direct engagement with external since its inception. We expect to do so until international travel diversity of perspective without limit. employers actively recruiting. resumes at scale and in order to protect more than 5,000 jobs. Our Employee Assistance Programme provides 24/7 At its peak, over 70% of our workforce were on furlough leave, comprehensive support to every individual and their families, Our people create unrivalled experiences for our customers, For those who left us or moved into one of our holding pools declining to around 40% by the end of 2020. alongside a series of webinars to ensure our people have across every touchpoint. Throughout the people journey and this enabled many to move into other employment. For our meaningful access to mental, financial, emotional and social across the airline, we support our people to be at their very best people who spent large amounts of time on furlough in 2020, we Throughout, we have focused on rotating our teams to respond support. For what has universally been one of the toughest and to bring their true selves to work. We attract and retain promoted volunteering opportunities with organisations such as to our flying programme and to support as many people as years professionally and personally for so many, no-one at talented, enthusiastic and collaborative people across a broad the NHS and many were able to put their invaluable skills to use possible to feel connected with their colleagues, customers Virgin Atlantic stands alone. range of skills, backgrounds and experiences. supporting the UK’s frontline response to Covid-19. and roles at Virgin Atlantic. We have put in place targeted support for those on furlough, including financial wellbeing We approach career development and promotion in the same, and one-to-one support tools for our leaders. We have been meritocratic way. Meaning our people don’t come to work to consistently measuring the happiness of both our colleagues in just do a job. They come to laugh, learn and lean in to the Virgin work and colleagues on furlough in a fortnightly pulse survey, to Atlantic spirit. A performance-led airline that is committed to understand and take action for teams and individuals requiring excellence and values the contribution of every single person. additional support.

In 2020 we took difficult decisions to ensure the survival of Virgin Safety and well being Atlantic and to protect as many jobs as possible. But sadly, we For our people and customers, health, safety and security is our could not save every job. In May and September we announced number one priority. Always. Our people focused Be Safe, Be redundancies affecting 4,300 roles in total. Difficult decisions for Well, programme mirrors our customer facing Fly Safe, Fly Well any company to take but heart-breaking for Virgin Atlantic where programme. Delivering a Covid-19 safe environment for all our our people are at the centre of everything we do. teams. Whether on board, at the airport, in our hangar or at our offices, we have industry leading measures in place so that our people feel safe when working and have the tools needed to work safely and effectively from home.

28 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 29 Sustainability continued Sustainability continued

Sustainability continued

Getting back to our best in 2021 Diversity, equity and inclusion Our planet Industry and Government leadership is now essential to deliver As we enter 2021, the talent and creativity of our people must Ensuring we have the right mix of people with the right skills meaningful change in the years ahead. The Jet Zero Council and continue to be recognised and developed. To retain and build to do the role will enable us to become the most loved travel the COP26 climate summit taking pace in Glasgow in November our pipeline of future leaders, we must support all our people to company. At Virgin Atlantic, we have been pioneering sustainability present an opportunity for the UK Government, alongside UK embrace a growth mindset. To think like a start-up and act like leadership for over a decade. In 2020, we became a signatory aviation, to build momentum in the global effort to reduce an owner of Virgin Atlantic and to live our values, every day. Virgin Atlantic has a long-established reputation for of Sustainable Aviation’s commitment to Net Zero carbon carbon emissions. championing diversity and inclusion. For us, this commitment emissions by 2050. We also joined the UK’s Jet Zero Council, a During 2020 we transformed the way we delivered training, goes beyond the workplace. It must permeate the industry and cross industry and UK Government working group, established Our carbon footprint and metrics in 2020 for example, moving much of our operational training online. the societies in which we live and work. to reduce barriers and accelerate solutions to decarbonise the Our total carbon footprint in 2020 was 2.2m tonnes of CO2e, a Reducing costs, increasing flexibility, and driving improved aviation sector. third of our 2019 footprint and a direct result of the reduction in learning satisfaction scores. Our ‘Be Yourself’ initiative launched in 2019. Focused on operations due to the Covid-19 pandemic.3 awareness, inclusion and recognising the value of difference and Between 2007 and 2019 we reduced our aircraft carbon For example, our cabin crew learning satisfaction scores diversity. At Virgin Atlantic, we know this breadth of perspective, emissions by 20%. As a result of the early retirement of our four The carbon and fuel efficiency of our aircraft remains the number improved by 14 ppts since adopting digital learning. Similarly, experience and opinion improves our decision making. engine aircraft in 2020 and the improved efficiency of our newer, one environmental priority, accounting for more than 99% of we have received very positive feedback from many colleagues, Extending our reach and allowing our people to know they modern fleet; we estimate that our CO2 /km will reduce by a operational (Scope 1 and 2) carbon emissions. When taking into which highlighted benefits such as greater flexibility and belong. No matter where they come from, the colour of their further 10% in 2021 (compared to 2019). account our operational emissions and scope 3 indirect emissions enabling our teams to learn on their terms, when their energy is skin, their sexual orientation or their religious beliefs. from across our value chain, aircraft carbon still represents nearly at its highest and in the comfort of their home environment. In 2020, global aviation capacity fell by 57%1 and IATA is currently 90% of our full footprint. Initiatives both within the organisation and in the community forecasting that longhaul travel will not return to 2019 levels until In a year where most in-person experiences have been lost, have included LGBTQ+ education for our holiday destination 2024.2 This has impacted the first stage of the Carbon Offsetting The aircraft we operate makes the biggest difference to our we have focused on new ways to retain the connectivity of our partners, supporting Pride festivals in the United States, France and Reduction Scheme for International Aviation (CORSIA) fuel use and carbon emissions. For over ten years we’ve been people. Undoubtedly the human touchpoints of the journey are and across the United Kingdom, and the development of an which was designed by ICAO to achieve the global aspiration for transitioning to a cleaner, greener fleet. Our entire fleet now what make Virgin Atlantic most loved – for our people, as well inclusive hiring toolkit. carbon neutral growth. Under the agreement, the baseline year comprises twin engine aircraft including Airbus A350s, A330s as our customers. has been reset to 2019 and offsetting is now not expected under and Boeing 787s. Despite a headcount reduction of 41% in 2020, there has been the scheme until industry growth surpasses 2019 levels. These

In October we launched a re-connect platform across the limited impact on our diversity and inclusion targets. But with changes do not diminish our determination to find innovative We reduced our CO2/RTK by 18% between 2007-2019. In 2020, airline, targeted at those who have spent long periods on recruitment largely frozen and with our holding pool structure and effective ways to reduce our carbon emissions. our metrics were impacted by Covid-19 as reduced passenger

furlough to provide a re-entry point for all our people, given the in place, our levers of change are limited in the shorter term. numbers meant our CO2/RTK increased, as this is a measure of transformation of the airline in 2020. Helping our teams get up In 2021, we will be refreshing our target - recognising current We are long term supporters of technology innovation and carbon emissions relative to the passengers and cargo we carry. to speed with how Virgin Atlantic 2.0 looks today, to understand constraints but unwilling to compromise on driving positive development to achieve the commercialisation of sustainable However, our current, simplified fleet will be c10% more fuel and our three critical missions of Survival, Love and Profitability, and change. Change that makes us better for our people, our aviation fuel (SAF) in the UK and internationally, as shown carbon efficient per km flown when compared to our fleet in

to reconnect all our teams with our vision, values and plans as customers, our communities. by our long standing partnership with Lanzatech since 2011. 2019, and we will see improvements in the CO2/RTK metric as we head into 2021. We actively support their efforts to scale up their technology demand returns and our load factors increase. % Female End 2019 End 2020 to convert industrial waste gases into various low carbon products, including jet fuel. We are also engaging with suppliers, Total headcount 62% 60% researchers and industry partners to promote collaboration Management grade D+ 42% 40% on SAF development.

1 IATA analysis based on available seat kilometres flown (domestic and international)iata.org/en/pressroom/pr/2021-02-03-02/ 2 IATA economic analysis ‘Covid-19 outlook for air transport and the airline industry’ November 2020 iata.org/en/iata-repository/publications/economic-reports/airline-industry-economic-performance-november-2020---presentation/ 3  CO2e, or carbon dioxide equivalent, is a standard unit for measuring carbon footprints. The idea is to express the impact of each different greenhouse gas in terms of the amount of

CO2 that would create the same amount of warming

30 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 31 Sustainability continued Sustainability continued

Sustainability continued

2020 carbon emissions Our actions Community Our long term initiatives to improve the carbon efficiency of our operations have centred on three key areas: fleet, sustainable fuels and CORSIA. A short film ‘Three steps to Our flagship community programme, Passport to Change, tackle our footprint’ can be viewed on our website focuses on supporting and inspiring young people into the world virginatlantic.com/changeisintheair/climateaction of STEM, aviation and travel. Up until March 2020, hundreds of our people engaged with students from schools in our local In 2020 non fleet actions to reduce our energy usage and communities of Crawley, Swansea and Atlanta. Virgin Atlantic carbon emissions have largely been a result of the resizing and pilots, cabin crew, engineers and people from our finance, people Scope 1: 73.5% re-shaping of Virgin Atlantic in response to Covid-19. Despite technology, and communications teams, took part in one-to-one (>99% from aircraft emissions) some of these actions being geared towards survival, we expect mentoring support, sharing their career stories and taking over these decisions to deliver carbon savings beyond 2020. the classroom to offer lessons in wide ranging topics. These Scope 2: 0.1% ranged from CV building to the theory of flight (complete with (Electricity) Our non fleet actions include moving our flying programme paper aeroplane competitions). from Gatwick to Heathrow and preparing for the closure of our Scope 3: 26.4% Gatwick hangar, and other airport properties. We revised our With the onset on Covid-19 and school closures we paused A: Jet fuel related 15.2% two main office buildings in Crawley into one. And from January Passport to Change, pivoting to support local and national B: Value chain 11.2% 2021, the VHQ becomes a single head office as we wind down efforts in response to the pandemic. Our cargo operations and exit The Base. The VHQ is significantly more energy efficient, provided vital transportation links – bring PPE and test kits utilises heat pumps instead of gas, and the base build was rated into the UK to support frontline NHS staff. Our people excellent by BREAAM on completion. Across our car fleet, we volunteered across the NHS, including at NHS Nightingale and also accelerated the transition to hybrid and returned all petrol other hospitals, ambulance services across the UK, building and diesel cars to the lessor in the year. respiratory equipment and more.

We seek to do business responsibly and continually strive to We also got in touch with our local partner schools to donate Our full footprint, energy usage, intensity metrics and improve our environmental behaviours and footprint, going no-longer-used iPads, laptops and monitors to disadvantaged methodology are set out overleaf. beyond carbon emissions to encompass waste and water students. Enabling them to access virtual home-schooling and management, human rights and animal welfare, both in our supporting efforts to reduce the vast numbers of children unable business and within our supply chain. For more information, to access education whilst schools were closed. you can keep up to date with our activities and news on our website: virginatlantic.com/changeisintheair Alongside this work, our people have continued inspiring the next generation into STEM and aviation. We’ve partnered with Fantasy Wings, an organisation that encourages more women and young people from the Black, Asian and Minority Ethnic (BAME) communities, to consider a career in the aviation industry and to add diversity to the flight deck where currently only 5% are women and 7% BAME.

We also work closely across industry networks that support female career development in our sector. Virgin Atlantic is an active member of Women in Aviation and Women in Hospitality, Travel and Leisure. Our participation includes board and committee representation alongside many of our senior leaders providing mentoring and contribution to development programmes.

32 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 33 Sustainability continued Sustainability continued

Sustainability continued

Type of Activity 2019 emissions 2020 emissions 2020 emissions YoY change Sustainability Metric 2019 data 2020 data YoY % change

emissions (tCO2e) (tCO2e) (%) (%) Aircraft CO2 (kg) per revenue tonne kilometre 0.719 0.823 14.5%

Aircraft fuel 4,190,727 1,597,904 73.4% -61.9% Total CO2 emissions (tonne) from aircraft operations 4,148,970 1,581,962 -61.9%

Natural gas 2,428 1,808 0.1% -25.5% Aircraft CO2 (g) per passenger kilometre 78.9 119 50.8%

Direct Ground vehicles 608 164 0.01% -73.1% Aircraft CO2 (g) per cargo tonne kilometre 470 496 5.4% (Scope 1) Refrigerant 0 827 0.04% - Electricity use, kWh 12,409,002 9,011,904 -27.4% Other fuels 466 229 0.01% -50.9% Gas use, kWh 8,524,419 8,749,654 2.6%

Subtotal 4,194,229 1,600,933 73.5% -61.8% Combined Electricity and Gas, (tonnes) CO2e 4,739 3,710 -21.7% Average aircraft noise (decibels) 95.1 93.3 -1.9%

Indirect energy Purchased electricity1 3,225 2,101 0.1% -34.9% (Scope 2) Subtotal 3,225 2,101 0.1% -34.9% Methodology Total PAX Weight (100kg per PAX, includes bags) + Total • For our aircraft carbon metrics, we used following Seat Weight (50kg per seat) divided by the Total Weight methodology: (PAX + seats + cargo). We have taken this formula from Category 1 - Purchased goods and services 240,503 126,511 5.8% -47.4% the ICAO Carbon emissions calculator methodology: Category 2 - Capital goods 211,469 39,009 1.8% -81.5% i.  Total CO2 emissions: Calculated using the aviation turbine icao.int/environmental-protection/CarbonOffset/ Category 3 - Fuel and energy related, 869,019 331,601 15.2% -61.8% Indirect other fuel CO2 conversion factor multiplied by the amount of fuel Documents/Methodology%20ICAO%20Carbon%20 well to tank (WTT) (Scope 3) used from all flights. Calculator_v10-2017.pdf Category 4 - 92 158,433 39,608 1.8% -75.0% Category 11 - Use of sold products 249,844 37,676 1.7% -84.9% ii. CO2/Revenue Tonne km. As above, CO2 is calculated using iv. CO2/Cargo Tonne km. As above, CO2 is calculated using the Subtotal 1,729,268 574,495 26.4% -66.8% the aviation turbine fuel CO2 conversion factor multiplied by aviation turbine fuel CO2 conversion factor multiplied by the the amount of fuel used. RTK is calculated from all revenue amount of fuel used. A passenger to cargo weighting is also (paying) passengers and freight (cargo) flown multiplied by applied as described above. CTK is calculated from the weight Total emissions (tCO2e) 5,926,722 2,177,529 100% -63.2% the total number of kilometres flown. The airport to airport of cargo flown multiplied by the total number of kilometres distance is calculated using the Great Circle Distance (the flown (Great Circle Distance + 8%). Carbon Footprint Methodology For Scopes 1 and 2 we use actual data collated from our shortest distance between two points on a sphere). This In line with the Greenhouse Gas Protocol, we compile our operations. However, due to fewer people actively working in the is then increased by 8% to allow for ‘real world’ distances • Energy use relates to sites where we are billed directly for our carbon footprint by ‘Scope’. This enables us to calculate and business during 2020 and 2021 due to the Covid-19 pandemic flown. By way of example: including sub optimal routing energy use and is derived predominantly from our main sites understand the sources of our direct and indirect emissions there is some estimated data this year. Where categories have and queueing to land at airports during periods of heavy which are The VHQ, The Base, Heathrow and Gatwick Hangers and to identify our most important carbon impacts. In order to been estimated they have been based on a % of the 2019 congestion. Our methodology for 2019 and 2020 intensity and the Swansea Customer Centre. Electricity also includes report greenhouse gas emissions we must convert ‘activity data’ consumption. Estimated categories in 2020 are ground vehicles, metrics (CO2/RTK and CO2/PK) differs from previously smaller airport properties. Gas values differ from our carbon such as distance travelled, litres of fuel used or tonnes of waste retail stores and some airport properties which represents <0.5% published data due to a correction to our GCD calculation. footprint assessment, as for the footprint we also include disposed into carbon emissions. Emission conversion factors of our total footprint. estimated gas usage associated with our airport lounges. are used for this purpose and each year we use the published iii. CO2/Passenger km. As above, CO2 is calculated using the

DEFRA emission factors: Scope 3 emission calculations rely on some modelling aviation turbine fuel CO2 conversion factor multiplied by the • Average aircraft noise is modelled using the number of flights www.gov.uk/government/collections/government-conversion- techniques using financial data as well as actual data. The largest amount of fuel used. PK is calculated from all passengers performed by each aircraft type multiplied by the aircraft noise factors-for-company-reporting. contributor, category 3, uses actual data and the appropriate (“PAX”) flown multiplied by the total number of kilometres specifications for take-off, lateral and approach respectively. DEFRA emissions factors. Categories 1, 2 and 11 are modelled flown (Great Circle Distance + 8%). A passenger to cargo We then create an average across all aircraft by dividing by the Our aircraft carbon emissions are independently verified each using financial data and 2019 Comprehensive Environmental weighting is also applied so that emissions can be allocated total number of flights performed in the year. During 2021 we year for submission to EU Emissions Trading Scheme (EU Data Archive emissions factors. Categories 4-9 have not been between passengers. This takes into account luggage, seats, expect to review and update our methodology for assessing ETS) and the Carbon Offsetting and Reduction Scheme for directly calculated as typically they contribute <1% individually etc. excluding the emissions associated with transporting and reporting noise. International Aviation (CORSIA). to our footprint, and these activities were all greatly reduced in cargo. The passenger cargo weighting is calculated as 2020. Instead we have estimated their contribution as 25% of follows: the 2019 figure.

1 We purchase 100% of our electricity from green energy tariffs (REGO scheme backed suppliers) although we still count this consumption within our carbon footprint calculations. 2 Categories 4 – 9 includes things like business travel, commuting, onward customer travel and waste.

34 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 35 Risk management Risk management continued

Risk management Risk governance model

Our Risk Management Philosophy Risk Management Processes Board of Directors & Audit Committee We believe corporate risk processes create value and protect Our risk processes are dynamic, allowing for risk escalation and the organisation by: allowing us to be better prepared and de-escalation from divisional, project and process risk registers Sets overall risk appetite in line with strategic objectives more flexible; providing oversight of opportunities; helping into a central Top Risk Register. Top Risks are assessed for us prioritise and deploy limited resources; and minimising the likelihood of occurrence, and impact on corporate objectives Assesses effectiveness of risk management systems impacts of risks that subsequently materialise into bigger issues. and strategy by using a number of lenses. Risk taxonomy, risk Approves the risk framework and policy language and risk assessment scales are aligned and deployed During the past year, our risk processes have been reviewed and consistently across the business. re-aligned to focus on speed of response and agility in a period of unprecedented change for the business, especially in light of This provides a consistent and comparative method to focus the threat the Covid-19 brought to our industry. We have put a attention on the aspect of risk management that matters the CEO & Leadership Team particular focus on strengthening cash and covenant-related risk most, namely identifying additional mitigation activity and/or processes, and established a number of new governance bodies investment needed to maintain our risk profile within our Assesses risk landscape and identification of material risks charged with the management of these critical risks. agreed appetite. Defines risk appetite and individual risk tolerance Corporate Risk Team Reviews adequacy of mitigating actions and controls At the same time we have ensured that the health and safety As health, safety and security is our number one priority, Defines corporate risk policies of our people, customers and suppliers remain at the heart of underpinning everything we do, this risk category has its own Ensures appropriate resource allocation and procedures our decision making, so as to ensure these central objectives reporting structure and escalation procedures. These integrate Co-ordinates executive/board and values are not impaired or degraded in any way. with our corporate risk processes through shared membership, risk discussion aligned frameworks and a cadence of regular meetings. The combination of resizing and reshaping Virgin Atlantic, A number of additional risk committees and working groups Independently assesses and operating flights during an active pandemic and the necessity have been established where needed to provide additional escalates significant risks for homeworking for the majority of our people, has naturally led governance over Top Risks, such as information security or Safety & Security Operating units Risk training and support to business to an increased risk in operational issues. In response, we have crisis management. Review Board deployed additional technology solutions and processes to help Assesses localised risks mitigate these heightened operational risks. Our risk governance model can be seen in the table on Independently chaired and landscape the next page: Interfaces with Throughout the changes made we have ensured our overall Reports on key risk indicators regulatory agencies control objectives remain central to the business, and maintained a close involvement with the risk function in the planning of Sets high level strategy Manages risks within all key projects. Our Head of Audit & Risk has been appraised and policy defined tolerances of and kept involved in all key business decisions which had Monitors effectiveness Implements of risk the potential to impact critical control objectives ensuring the of safety supervision response plans maintenance of a robust control environment.

Safety groups Information Security Board Other boards

Flight and cabin safety group Independently chaired Financial Risk Committee Oversees data security Engineering safety group Organisational Resilience Board and privacy Monitors cyber security Security action group Crisis Management function risks and mitigations

36 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 37 Risk management continued Risk management continued

Risk management continued

Principal risks and uncertainties Risk Category 1: Safety, terrorism and security incidents To ensure the robustness of our security regime we operate a Our health protection measures include state of the art HEPA In 2020 we defined our Top Risks across seven categories, being self-inspection and test programme. Joint audits and inspections - standard filtration in all aircraft; cleaning and disinfecting (i) Health, Safety and Security (ii) Financial & Macro-Economic are also conducted with regulators. Regulated compliance between all aircraft rotations; provision of masks and other (iii) Crisis Management & Business Continuity (iv) Sustainability Risk 1.1: Health & Pandemic Protection performance is monitored by way of a dedicated scorecard protective equipment; sanitiser, guidance and social distancing (v) Technology & Data Security (vi) People and Brand and (vii) Change in year: Materially Unchanged which is reviewed by the Safety and Security Review Board. measures at all customer and employee touch points and our Regulatory and Legislative. places of operation. We also amended our onboard offering to Risk Context We adopt a holistic approach to security with the Corporate allow for fewer touch points and wherever possible encouraging Our approach to evaluating the risks and their impact on our A major flight or ground safety event could have a significant Security team having overall responsibility for security matters self-service activities by customers, such as on-line check in and business generated by the Covid-19 pandemic has been to impact on our ability to operate or attract customers. In addition, linked to aviation, border security, cargo, facilities, personnel self-service bag drop. consider the pandemic against these seven risk categories. We all aviation and package holiday businesses are generally and asset protection. In view of the ongoing targeting of civil have therefore assessed what mitigations are managing and exposed to security threats, including the threat of terrorism. aviation and the potential impacts of global geopolitical events, The awarding of Diamond status for Health and Safety (the controlling the potential risk impacts in each risk category, rather much focus is placed on threat monitoring and assessment to highest possible standard), by APEX and Simpliflying, was than including a standalone risk category for the pandemic. A safety or terrorism related event would undoubtedly have ensure that we have the most current and accurate data to make recognition of our unwavering commitment to keeping a significant impact on demand or on our operational ability. informed judgements about the security of our people and our our people and customers safe, and our initiatives such as Several of our key risks have seen changes in their profile Accordingly, the safety of customers, crew and staff is at the physical assets. complimentary Covid-19 insurance cover, pre-flight testing and during the year, as identified in the table below. Whilst we do heart of all of our business processes and decisions. on board safety protocols. not disclose any new emerging risks, the aggregate impact of Risk 1.2: Health & Pandemic Protection the Covid-19 pandemic across the past year means that the risk Main Controls and Mitigations Change in year: Increasing We comply with all border entry requirements at all destinations landscape for the Group as a whole has nonetheless become Safety and security is our number one priority. It is the and routes we operate, and we have established processes materially more challenging. cornerstone of our corporate strategy and underpins Risk Context to ensure these remain up to date in the rapidly changing everything that we do. During an active pandemic, there is a risk that a major environment. Increased Decreased outbreak of the virus in our workforce could have a significantly During 2020 and through the Covid-19 pandemic, we have seen detrimental impact on our ability to operate and generate Health & pandemic protection Industrial relations a materially lower level of aircraft utilisation, as fewer routes revenue, as well as impacting on our primary duty of care to Liquidity & financing risk and passengers were flown. In response we have launched a our employees. number of new routes, some as cargo-only routes, and our Supplier failure risk cargo business has materially increased. Despite these network We have a critical and legal obligation to ensure we provide Technology & data security and operating changes, our safety and security processes have a safe working environment whether onboard, in our ground remained consistent, robust and stringently enforced. facilities or in the office. Equally, ensuring that our aircraft are The directors believe that the risks and uncertainties described safe, hygienic environments, and are seen as such, is critical below are the ones which may have the most significant impact The CAA authorises us to conduct our activities following to support customer confidence. A major spreading event on our long-term performance. assessments of safety, ownership and control. In addition attributable to inadequate hygiene on-board our aircraft would to complying with all regulatory and airworthiness directives pose a major risk to our ability to attract customers and operate and processes, we have an independently chaired Safety to jurisdictions. and Security Review Board, comprising Executives and Senior Managers from across the Group, which reports directly Main Controls and Mitigations and regularly to our Board of Directors on our safety and The health of our employees and customers has always been security position. a central consideration of our operations, and during the Covid-19 pandemic the importance of ensuring a safe operating environment for our staff, and a safe transportation environment for our passengers, has been our immediate and critical priority.

38 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 39 Risk management continued Risk management continued

Risk management continued

Risk Category 2: Financial & Macro-Economic Throughout 2020 we have placed significant importance on Risk 2.2: Foreign currency and jet fuel risk During the Covid-19 pandemic, our level of flying materially strengthening our cash management and reporting processes, Change in year: Materially unchanged decreased, lowering both our required fuel volumes and the including the establishment of a cash committee to oversee day level of risk associated with jet fuel price movements in 2020. Risk 2.1: Liquidity and financing risk to day cash management activity and strategic cash decisions, Risk Context Although lower volume of fuel was purchased, a number of Change in year: Increasing supported by more frequent and granular cash modelling and We have significant exposure to US Dollar denominated costs, fuel price protection hedges taken out in 2019 for planned but cash forecasting activity. most significantly for jet fuel and aircraft financing and interest unused 2020 fuel purchases meant that we did incur material Risk Context costs, but also for fleet maintenance and other US Dollar increased cost to unwind our fuel hedge book. As our operations During the Covid-19 pandemic, the major risk to our liquidity We have established controls and a governance body to financing arrangements. Adverse movements in the US Dollar ramp back up in H2 2021, our fuel price risk will increase, at comes from a combination of decreasing forward sales, the need focus on control and accurate forecasting and reporting of to Pound Sterling rate can therefore significantly impact our which point our appetite for hedging and the access to hedge to refund customers, stemming from a high volume of passenger our counterparty credit position, supported by increasingly financial position. agreements with reasonable premiums will need to be flight cancellations together with a high degree of fixed cost, sophisticated modelling of ticket and revenue cash flows. carefully balanced. driving cash outflows. Inventory valuation controls and stock forecasting to support We also have a net exposure to a number of other currencies compliance obligations related to inventory-secured loan due to local currency revenues typically exceeding costs. The agreement with creditors with respect to a number of Other risks to liquidity are driven by business performance, agreements have also been established within our strategic Repatriation may be constrained in countries where exchange financing agreements as part of the solvent recapitalisation has capital investments, our financing structures, and the timing inventory steering committee. controls are imposed to regulate the flow of money. resulted in lower projected cash outflows for 2020-21, which has of associated cash flows. We are also exposed to the risk of also led to a decrease in the USD foreign exchange risk element increased finance costs as a result of movements in interest rates Our Financial Risk Committee continues to operate as previously In addition, jet fuel comprises a significant and material element for the same period. on floating rate debt, and the general availability of financing structured, and now with an enhanced remit and focus on of our cost base, and we therefore have considerable exposure options in a very challenging industry environment. covenant and recapitalisation compliance obligations in addition to adverse movements in the base price of oil and jet fuel, Risk Category 3: Crisis Management & Business Continuity to prior responsibilities. independently of the foreign exchange risk outlined above. We have a requirement to meet a range of covenants and agreements that relate to our cash balances and third- The net exposure to movements in interest rates is calculated Main Controls and Mitigations Risk 3.1: Key Supplier Failure Risk party reporting as a result of the solvent recapitalisation and managed with a view to reducing the impact of any Where possible we reduce our exposure through the matching Change in year: Increasing which completed in September 2020. Failure to meet these potential rate increase. A mix of fixed and floating rate products of receipts and payments in individual currencies. For countries requirements or deliver this information could result in the early is used to reduce exposure and where necessary we utilise where remittance challenges and risks exist, we closely monitor Risk Context repayment of loans and other working capital facilities. financial instruments approved under our risk management our currency exposure to identify any issues at an early stage We are dependent on suppliers for several of our principal policies. and to take remedial action, both operational and financial, business processes. The failure of a key supplier to deliver Derivative financial instruments are used selectively for financial to minimise the value of these funds. Where a significant contractual obligations could have a significant impact on risk management purposes. The timing difference between Any hedging activities are undertaken in line with our financial exposure in foreign currency holdings remains, we utilise operational performance and customer delivery. derivative maturity date and current mark to market value can risk management policies to provide a degree of certainty for financial instruments approved under the financial risk give rise to cash margin exposure in volatile markets. future financing costs and to reduce volatility of cash flows. We management policies. The ongoing Covid-19 pandemic has put additional pressure on do not speculatively trade and use these instruments to manage our supply chain, leading to a generally heightened risk for many Main Controls and Mitigations the underlying physical exposures of the business. We aim to protect ourselves from significant near-term adverse businesses we deal and transact with on a daily basis. We have taken a range of immediate short, mid and long term movements in the jet fuel price. Our fuel hedging policy allows actions designed to protect our liquidity and working capital for the use of derivatives available on the over the counter (OTC) Main Controls and Mitigations position during the ongoing Covid-19 pandemic. markets with approved counterparties. We do not speculatively Our Organisational Resilience Board has oversight of this risk trade and use these instruments to manage the underlying and meets regularly to assess the controls linked to our key The solvent recapitalisation provided us with a restructuring of physical exposures of the business. suppliers’ performance. our cost base and immediate additional liquidity of £370m. We continue to actively explore additional financing and liquidity- injection opportunities to maintain sufficient liquidity during this period of low flying activity.

40 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 41 Risk management continued Risk management continued

Risk management continued

We carefully assess the adequacy and resilience of our supply Main Controls and Mitigations Risk Category 4: Sustainability We have supported the development of sustainable aviation chain when entering into new contractual agreements and As the Covid-19 pandemic has demonstrated on a global scale, fuels since 2011, including through our partnership with maintain close relationships with existing key suppliers to ensure despite the existence of resilience plans and functions, it is very sustainable fuel technology business LanzaTech. We believe we are aware of any potential supply chain disruption. difficult for any entity to realistically and adequately plan for a Risk 4.1: Consumer expectations on sustainable aviation this development will be best achieved through industry- widespread global event that has the potential to stop all trading Change in year: Materially Unchanged wide efforts and continually look to identify opportunities to During the Covid-19 pandemic, as part of our recapitalising activity for a sustained period of time. We instead look to support technology innovation and commercialisation of these activity, we have worked very closely with our suppliers to mitigate to the extent possible by ensuring agility and flexibility Risk Context sustainable aviation fuels. balance the need for their support towards our cost savings within our business model and operations. The risk management Consumer expectations are changing, with social responsibility measures, against their own economic and trading risks. processes we have established are designed to protect us from towards the environment playing an increasingly strong role We are active members of a number of industry groups future short and mid-term shocks associated with crisis events, in determining preference. As leaders in travel and aviation we including the Jet Zero Council and Sustainable Aviation. We continue to carefully monitor the impact of the Covid-19 and briefly are as follows: have a vital role to play in addressing the climate crisis and we Together we continue to lobby for regulatory changes needed to pandemic on our supply chain, and ensure the actions we are know that climate action is important to our customers, our allow initiatives to be scaled at speed, and co-ordinated industry taking do not place unnecessary stress on our valued suppliers We have a dedicated crisis management and resilience function people and the wider world. approaches on issues which have a benefit for all. and counter-parties. which constantly and consistently manages this risk from an operational perspective. We maintain a dedicated crisis In 2020 the Covid-19 pandemic led to a greatly reduced level of Risk 4.2: Financial or other challenges to achieving carbon Risk 3.2: High impact/low likelihood adverse events management centre within our headquarters, with a continual passenger flying. We expect as flying recovers that consumer reduction commitments Change in year: Increasing operational readiness state 24/7/365, with clearly established expectations and travel choices will increasingly be influenced Change in year: Unchanged protocols for engaging, escalation and resolution of potential by the actual and perceived sustainability of the businesses they Risk Context crisis events. We also have a team of volunteers trained in crisis transact with. Risk Context Black swan and crisis management risk scenarios apply to all management situations who can be called upon for support The challenges to our carbon reduction efforts include any airline and package holiday operators, these include but are not activity at short notice. Main Controls and Mitigations material delay in the commercial availability, increased market limited to: Our actions to support a comprehensive programme of carbon costs of appropriate sustainable aviation fuel supply or carbon We conduct company-wide business impact analysis, and have reduction and other sustainability measures - such as on single- offset projects, as well as the risk of the proliferation of • Significant eatherw events which impact our ability to operate established Business Continuity Plans for all the critical areas use plastics and waste/energy efficiency - demonstrates to independent carbon-related taxes across the markets our flying plan or deliver on our holiday packages; of our operating and head office functions. These remain under our customers and stakeholders our continued sustainability we serve. • Terrorism events which lead to a pronounced reduction in continuous review. We test our crisis management processes leadership and commitment. consumer demand and confidence; regularly using a range of different and changing scenarios. New taxes and increasing price of carbon costs might impact • A critical safety event on a Virgin operated aircraft; In 2020 we committed to net zero carbon emissions by 2050. the demand for air travel with customers choosing to reduce • Worldwide fleet grounding events; Our Organisational Resilience Board and Safety and Security To support this, we are developing new interim targets and the times they fly. Future legislative changes could lead to an • The unplanned and prolonged downtime of a critical computer Board meets regularly to assess the sub-risks associated with reporting metrics, aligned with industry best practice, in order uncoordinated array of climate policies and taxes. This has system; and crisis management and business continuity. We have a number to provide clear and transparent monitoring of our progress. We the potential to create competitive distortion and increase • Future pandemics, or other World Health Organisation global of additional domain-specific controls established for both continuously work to find ways to improve the efficiency of our compliance costs without effectively managing aviation events, which lead to widespread closure of airspace and/or information systems disaster recovery risks, and for health, operations, and regularly commission independent assessments emissions. territories for a short- or medium-term duration. safety and security risks – please refer to the relevant risk of our environmental performance through organisations such sections detailed in risk category 5. as CDP. The timetable for development and commercial availability If any of these crisis events were to transpire, the ability of sustainable aviation fuel remains uncertain, and the of our business to respond and survive depends on having We have transformed our fleet over the past decade from four- aviation industry recognises that market-based measures well established crisis management and business continuity engine powered aircraft to more efficient twin-engine aircraft are also going to play a part in mitigating carbon emissions, processes. through a multibillion-dollar investment programme, which particularly for long haul flights in the medium term.

has delivered a material reduction of 18% in CO2/RTK from the There is a risk that, despite taking precautions, our preparations fleet between 2007-19. Our fleet simplification actions in 2020, may not be sufficient to protect us from material damage should moving to the operation of twin-engine-only aircraft, improves an actual event occur. fleet efficiency/km flown by an additional 10% vs 2019.

42 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 43 Risk management continued Risk management continued

Risk management continued

There are uncertain future costs and the financial impact Risk Category 5: Technology and Data Security We have carefully and systematically developed solutions that Main Controls and Mitigations of market-based measures such as CORSIA (Carbon Offset allow us to support home working at scale. Since the start of We have an Information Security Board established with and Reduction Scheme for International Aviation) could be the Covid-19 crisis we have managed to support our changing overall governance and management of our technology and material. Under CORSIA, airlines from participating states Risk 5.1: Failure of a critical IT system, including from workforce requirements effectively. Our suite of security information risk landscape. The board also provides oversight of will be required to buy carbon offsets to compensate for the cyber-security threats tools are equally able to be deployed for both corporate and the information security improvement programme. global growth in CO2 emissions. Change in year: Increasing distributed working locations, providing ongoing security Our Information Security team, supported by a Security monitoring regardless of place of work. Operations Centre, conduct a range of information security Main Controls and Mitigations Risk Context measures. Such measures include, but are not limited to: We actively monitor the sustainable aviation fuel (SAF) We are dependent on IT systems for most of our principal Our technology team works closely and diligently with key network monitoring, vulnerability scanning, penetration testing development landscape, including working with our partners business processes. The failure of a key system through an system suppliers to ensure that we are operating our critical and various other proactive hardening measures to keep our at LanzaTech and other industry participants. We actively internal or external threat (including a cyber-attack) or event systems in a risk appropriate manner. data safe and secure. We invest significantly in the information support a broad range of industry efforts to develop the right may cause significant disruption to operations or result in loss security sphere each year, and continuously keep our tooling, commercial and regulatory framework for SAF production, of revenue. Risk 5.2: Information security and compliance with partnerships, operating models and processes under review. particularly in the UK. data protection With the changing ways of working as a result of the Covid-19 Change in year: Increasing Our Data Privacy Team and Data Protection Officer for Virgin We model our expected long-term fuel requirements and pandemic, we have a larger than usual home-based workforce, Atlantic Airways and Virgin Holidays report to our General implications for our need of sustainable aviation fuel in order to reliant on a variety of technology solutions being seamlessly Risk Context Counsel. The Data Protection Officer has a remit of oversight achieve our net zero commitment trajectory, and will look to put and effectively delivered to them remotely. This brings a Unauthorised access or loss of customer or employee data could ensuring compliance with data protection regulations. The in place SAF supply agreements in due course to help satisfy separate and heightened consideration to the resilience required, lead to significant reputation and financial damage. We have Privacy Team also provides support to the business in the design these requirements. compared to previous reporting periods. a duty and a requirement to ensure customer and employee and operation of processes, procedures, contracts, partnerships data is only used within the legislative requirements of the Data and campaigns that use personal data, as well as managing We also model the possible financial implications of CORSIA so Many companies and industries are reporting an increase in Protection Act and for purposes to which they have consented. customer and employee privacy requests and complaints from we can effectively plan for its implementation in combination targeted cyber-security threats and activity from criminal gangs data subjects. with our SAF strategy. We are actively engaging with offset in the wake of changes made to working arrangements following The Data Protection Act 2018 became law in the UK in May providers to develop our purchasing and investment strategy, the pandemic, which is adding to the increased 2018. This legislation works with the EU General Data Protection To facilitate privacy regulation compliance, investment was to create a diverse portfolio and spread the financial risk. Our risk of a successful cyber-attack. Regulations (GDPR) and allows for potentially significant fines made in 2019 to implement the One Trust privacy compliance Leadership Team regularly review the strategy and approach to to be levied for cases of serious data breach or non-compliance. system. We also continue to invest annually to ensure employee ensure visibility of expected near-term costs. Main Controls and Mitigations Versions of the GDPR are now also being enacted in a number of awareness of privacy matters. We are also compliant with the We have an Information Security Board with overall governance destinations served by Virgin Atlantic. Payment Card Industry standards. There was no enforcement Longer term we intend to focus on investing in robust carbon and management of our technology and information risk action in 2020 from any Data Protection regulator. reduction projects with strong community benefits. Wherever landscape. The board also provides oversight of the information As a consequence of our restructuring, in 2020 we saw higher possible we will be looking for projects in Virgin Atlantic and security improvement programme. volumes of data subject access requests. We continue to Virgin Holidays destinations, seeking those that have additional invest in this area and to work closely with the Information benefits such as job creation, health and wellbeing, habitat System controls, disaster recovery and business continuity Commissioner's Office to ensure we are properly discharging protection and storm resilience. arrangements exist to mitigate the risk of a critical system failure. our obligations. We deploy a wide range of preventative and detective controls, including technical solutions, to minimise the threat to our systems from cyber-attacks. Ongoing investment and efforts are directed to this risk to reflect the evolving nature of the threat landscape, including the purchase of appropriate insurance products where appropriate.

44 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 45 Risk management continued Risk management continued

Risk management continued

Risk Category 6: Brand & People Risk 6.2: Industrial Relations Risk 6.3: Talent acquisition, management, development Our initiatives include programmes designed to increase Change in year: Decreased and retention the representation of women in STEM subjects and careers; Change in year: Materially Unchanged mentoring programmes to support local schools; and Risk 6.1: Brand and Reputational Damage Risk Context apprenticeships schemes which allow us to identify and Change in year: Increasing We have a large unionised workforce represented by a number Risk Context attract the next generation of leaders. of different trade unions. Industrial action by key groups of We compete to attract the best talent globally. Without effective Risk Context employees or by the employees of key third party service talent management and development processes we may have We continue to rely on our brand and our people as The Covid-19 pandemic has had an unprecedented impact on providers could have potentially adverse operational and/or difficulty in attracting and retaining the people with the skills differentiating factors to offset these challenges as we strive to global aviation. While our vision to become the most loved financial impacts on the Group. we need to deliver our strategy. retain and to attract new talent, despite the current uncertainty. travel company remains intact, the path to achieving this has significantly changed with a reduced network, fleet, As part of the response to the Covid-19 pandemic, we had to Failure to meet our ambitions to be an open, inclusive and Risk Category 7: Regulatory & Legislative and workforce. take the difficult decision to undergo a large scale restructuring representative company could also compromise our ability resulting in a material reduction of our workforce during 2020. to attract and retain the best talent with critical skills and Main Controls and Mitigations We completed the consultation on this matter with the support experience, ultimately impacting company performance. Risk 7.1: Compliance with competition, anti-bribery and We continue to keep our people and customers at the heart of of our unions, and we continue to work closely and carefully with corruption law everything we do. Throughout the changes of the past year we their support as our response to the ongoing pandemic evolves. The aviation industry as a whole is facing the most challenging Change in year: Materially Unchanged have focused on retaining one powerful brand which stands period in living history, with a number of high profile airlines out and inspires our customers to trust and transact with us. Main Controls and Mitigations ceasing or dramatically throttling back operations. Within this Risk Context We constantly monitor a wide range of indicators to help us We recognise the unions Unite the Union and BALPA. Emphasis context there is therefore a general heightened risk both in We are exposed to the risk of unethical behaviour by individual understand how our customers feel about us and our brand. has been placed on maintaining ongoing dialogue and resolving potential rates of attrition, and in attracting the best talent. employees or groups of employees resulting in fines or losses to Throughout 2020 we have seen positive movements in metrics issues early at a departmental level in order to avoid escalation. our business. Legislation allows for potentially significant fines to related to cabin cleanliness and bio-security, confidence to fly, A significant level of discussion takes place during collective Main Controls and Mitigations be levied for cases of serious breach or non-compliance. trust with the Virgin Atlantic brand, together with satisfaction bargaining with unions prior to the adoption of any new policies The strong reputation and loyalty engendered by the Virgin with the services and products we deliver. which may impact our people and their work environment. Atlantic brand is a core part of the value of our company, and one Main Controls and Mitigations which continues to stand us in good stead when we compete for To mitigate this risk we have in place comprehensive training We have taken immediate action to help manage the short-term We have engaged fully and properly with all unions throughout talent, coupled with our competitive reward packages. schemes and controls in place to both prevent and detect non- impact to our customer service and brand stemming from the the difficult decisions we have had to take on restructuring the We maintain a clear and equitable talent management process compliance. E-learning courses have been established covering significant level of refund requests received as a result of flight business, and which have resulted in a materially decreased internally, linked to a variety of performance related pay competition, data protection and anti-bribery compliance. cancellations. This includes significantly increasing the size of headcount going forward. As a result of the goodwill and mechanisms, which encourage and reward effective performance Completion of these courses are mandatory for everyone across the team dedicated to processing refunds. We recognise the openness demonstrated from both the Group and the unions at both the individual and company level. We conduct succession the Group to complete on an annual basis, and immediately importance of every single refund, and for anyone who has throughout these discussions, we feel confident that our working planning to ensure that we have an effective view of our internal upon joining the company. requested one for a cancelled flight or holiday to be paid in full. relationships with these critical groups remains one based on and external talent pipeline, to provide continuity, and to identify achieving mutual goals, underpinned by trust and respect. development opportunities for our staff. For specific areas of higher inherent risk in the area of We will continue to ensure our customers always feel confident competition law, we provide additional annual specialized to fly with us - and will continue to strive always to be industry We have ambitious BAME and gender targets, and a number training courses, led by a legal compliance expert, to ensure leading in looking after the health, safety and security of our of strategic initiatives are running internally to ensure we meet that the relevant teams are very clear on legal requirements and people and customers in a way that retains our unique and these. We invest in a number of local and international efforts remain stringently within the bounds of acceptable behaviour. distinct brand offering. Our Diamond safety award noted in Risk to increase the diversity and strength of the longer-term 1.1 is a reflection of our significant efforts on customer safety. talent pipeline.

46 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 47 Risk management continued

Risk management continued

For our third-party relationships, all our suppliers and general We continue to engage with the UK Government to understand sales agents specifically agree in their written contracts with us how its objectives are expected to impact the business and to that they will comply with all applicable laws and regulations, constructively drive debate and effective policy formulation. together with adherence to our anti-bribery and ethical We regularly assess the impacts of UK Government policy and business policy. objectives on our business and take appropriate action as required. We maintain right-to-audit clauses in all our key and critical supplier contracts, giving us the ability to inspect records and Globally, we continue to assess political risk and work assure compliance where (or if) we have any concerns about with governments across the world to limit any potential supplier compliance with laws and regulations. regulatory impact on our operations. We retain legal counsel for all jurisdictions we operate in, as well as maintaining Risk 7.2: Compliance with other aviation regulatory close relationships with our trading partners, government authorities and government departments and through a network of trusted and Change in year: Materially Unchanged professional advisors to ensure that our operations stay in compliance with all required legislation. Risk Context Regulation of the aviation and package holiday industries is increasing and covers many of our activities, including safety, security, route flying rights, airport slot access, data protection, environmental controls, government taxes and levies. The ability to both comply with and influence any changes in these regulations is critical to maintaining our operational and financial performance.

Main Controls and Mitigations The CAA authorises us to continue our activities following assessments of safety, ownership and control as well as financial fitness criteria. The broad framework of which is available via the CAA website (caa.co.uk).

During the Covid-19 pandemic, the large volume of cancellations has meant that processes designed to meet other aviation regulatory requirements - such as refunds requirements set by the CAA and CMA - have been placed under high levels of strain which such processes were never designed to manage. This has been experienced across the industry. This has led to some limited failure to meet the expected levels and timescales for refunds, with some reputational damage. We have now re-engineered processes and restored compliance with these important requirements.

48 Virgin Atlantic Annual Report 2020 Corporate Governance Corporate Governance continued

Corporate governance

Overview Governance Code Board Composition Our Board composition reflects the concentrated shareholding The Board is responsible for the long term success of the Group. For the year ended 31 December 2020, under The Companies The Board of Directors comprises seven Non Executive Directors structure of the company and does not include an identified To achieve this, the Board leads and provides direction for (Miscellaneous Reporting) Regulations 2019, we have applied and two Executive Directors. Four of the Non Executive Directors independent director. The assessed skillset of the Board the Leadership Team by setting our strategy. Its role includes the Wates Corporate Governance Principles for Large Private are appointed by Virgin Group (51% shareholder), and three Non (see table below) is felt to be sufficiently broad and deep, overseeing strategic decision making, scrutinising the Companies (“Wates Principles”). Executive Directors are appointed by Delta Air Lines, Inc. (49% encompassing senior experience from across a wide range performance of its management in meeting the goals set by the shareholder). As set out in the company’s Articles, identified of industries and disciplines. Board and taking a proactive role in monitoring the performance We have adopted the Wates Principles as an appropriate Alternate Non Executive Directors can act for certain Non- of the Group as a whole. framework for our corporate governance arrangements which Executive Directors. The Board believes that when combined with the Executive are set out in more detail in various sections of this Report. Leadership team, this creates a group which has diversity, with The Board looks to convene in person regularly and where that is Its key principles are reviewed in the table below. As at 31 December 2020, the two Executive Directors were the varied and balanced experience and skills that are highly relevant not possible, conference calls are held so that management can Chief Executive Officer and the Chief Customer & Operating to the Group’s needs and challenges. This has served the Group update the Board on the Group’s performance. The Executive Officer. In addition, the Chief Commercial Officer and Chief well in the development and scrutiny of our strategic decision Directors also have regular meetings with representatives of Financial Officer each act as Alternate Director to the two making and performance. both shareholders as well as with their Board representatives. Executive Directors. All four are full-time employees of the Group.

Purpose and Leadership, stakeholder engagement Opportunities and Risks; Remuneration Board Composition and Skills Directors' Responsibilities

Purpose and Leadership Strategy Composition Responsibilities Our corporate vision, values and strategy are described The Board has provided ongoing support to the Executive The composition of the Board is set out above and its The Board and individual directors have a clear understanding throughout this Annual Report and set out in detail in the Leadership Team throughout the year, and in particular in subcommittees are set out on pages 52-53. of their accountability and responsibilities (see p57). These are Chairperson’s statement and the Chief Executive Officer’s report. support of the successful restructuring and recapitalisation underpinned by policies and procedures. programmes, using their significant experience in key areas of The Group has adopted the longstanding Purpose of our Holiday relevance to provide constructive challenge and scrutiny. Skills Areas of Focus business – ‘Everyone can take on the World’ – reflecting both our The Board benefits from the significant experience of its The Board and its sub-committees have provided review and business activities and our corporate culture of inclusivity, activism members across a broad range of industries and disciplines. challenge in a number of areas, in particular: and challenger spirit which has defined Virgin Atlantic throughout • Safety of our people and customers through the Covid-19 its existence. The Board representation during 2020 across five selected areas pandemic, including pre-testing and in-flight protocols; of particular importance, having identified those members who • Discussions with government and regulators, with topics Stakeholders Risk have held particular positions of significant relevant responsibility including financial support, job protection schemes and The Board is responsible for overseeing meaningful engagement The Board’s role is to ensure the long term success of the is as follows: support for the UK’s PPE logistics programme; with stakeholders including the workforce, and having regard to Group, whilst maintaining oversight for the identification and • The Group’s strategic and route planning response to global their views when taking decisions. mitigation of risk. Strategy 92% travel restrictions; Financial 67% • Restructuring and cost management projects, including See page 26-27 for a summary of our stakeholder engagement. During 2020 the Board approved a realignment of the key risk Airlines 92% headcount right sizing, asset retirement and disposals, categories around central topics including sustainability and Customer 75% streamlining and consolidation of operating bases and liquidity. The Covid-19 pandemic impacts have been considered Technology 42% aircraft refinancing; within the existing risk categories (see pages 34-46). • Refund programme management and cyber security; • Recapitalisation and creditor engagement programmes, Remuneration Flybe investment; The Board promotes executive remuneration structures • Corporate Purpose, Sustainability and plans for our Net Zero aligned to the achievement of KPIs required to deliver the long commitment; and term sustainable success of the Group. Metrics which define • Fleet management, including the retirement of our Airbus executive director remuneration are closely aligned to key A340 and Boeing 747 fleets. milestones and performance targets which are linked to the Group’s strategy. These do not differ significantly from those of the wider leadership team. 50 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 51 Corporate Governance continued Corporate Governance continued

Corporate governance continued

Audit Committee Remuneration Committee Safety and Security Review Board Information Security Board

Role of the Committee Role of the Committee Role of the Virgin Atlantic Safety and Security Review Board Role of the Virgin Atlantic Information Security Board (ISB) The Audit Committee is responsible for: the appropriateness The Remuneration Committee is responsible for making The Safety and Security Review Board is responsible for: The Information Security Board is responsible for information of accounting policies; ongoing compliance with accounting recommendations to the Board on the remuneration and other monitoring, improving and constantly enhancing safety and security oversight across the Group. As at 31 December 2020 the standards; and the adequacy and effectiveness of internal employment benefits of senior management employed by security management across the airline and Virgin Atlantic independent Chair was Stephen Head and the Executive Board reporting and control systems. It also oversees the scope of the the Group. The Committee also oversees the introduction and Holidays. member was Cornelis Koster. external and internal audit plans and the role of the Auditor. amendment of any long or short term incentive plans. Key responsibilities Key responsibilities Key responsibilities Key responsibilities • Setting the strategy and dealing with high level issues in Setting strategy and providing an oversight of the Group’s • The approval of the Group’s annual consolidated financial In carrying out its responsibilities the Committee seeks to fulfil relation to policies, resource allocation and safety and security practices and policies concerning confidentiality, integrity and statements, including the appropriateness of accounting the following aims. performance monitoring; availability of information. policies, compliance with accounting standards and material • Proactively reviewing data and encouraging continuous • Providing an oversight of the Group’s practices and policies matters such as contingent liabilities; • The setting and monitoring of a fair and appropriate improvement, to ensure the highest standards of safety and relating to the protection of the Group’s technology remuneration policy and its application for senior management; security assurance is maintained for our people and customers; infrastructure and applications against cyber security risks; • The scope of work for external audit, actions required as a • To ensure that policies, plan designs and reward decisions align • Monitoring the effectiveness of the Group’s safety supervision • Providing an oversight of the Groups practices and policies result of the Auditors’ findings and conclusions, the Auditors’ with business strategy, are well cost governed and support processes including oversight of subcontracted operations; relating to data protection; and remuneration and the reappointment or replacement of the sustainable business performance; and • Promotion of an open and honest reporting and discussion • Providing an oversight of the Group’s practices and policies Auditors; and • To balance the needs of Executive and shareholder interests forum, to enable the airline to learn from both internal and relating to the protection of physical assets used to process and to ensure alignment of reward policies with the Executive industry incidents; information. • The adequacy and effectiveness of the Group’s internal systems talent management strategy. • Ensuring that the Group continues to adopt and makes use concerning reporting and control; including ensuring that the of effective industry recognised risk management principles, The ISB brings together key stakeholders that can provide internal audit function is adequately resourced, has appropriate Members of the Committee to evaluate safety and security risks though a transparent risk oversight, governance and informed decision-making to ensure: standing within the Company with a primary reporting line The Remuneration Committee is made up of two Virgin management framework; to the Chairman of the Audit Committee, and to review and appointed Non Executive Directors and two Delta appointed Non • Checking to ensure the business develops, maintains, reviews • Information security risks are effectively and strategically approve internal audit plans of activity. Executive Directors. As at 31 December 2020 the Committee and tests its emergency response, threat management and managed; members were Peter Norris (Chairman), Ian Woods, Ed Bastian resilience plans on a regular basis; and • Plans are in place to manage all aspects of a serious information The Committee receives regular updates on the audit and Glen Hauenstein. Luigi Brambilla replaced Ian Woods (from • Providing the Board with regular updates and reports security incident; programme from the Group Head of Internal Audit. It meets with 20 Jan 2021). from both the Safety and Security Review Board and the • Monitoring of information security regulations, such as GDPR, the Group Head of Internal Audit and the external Audit Partner Independent Chair in relation to airworthiness, safety and PCI, NISD and CAP 1753; and without Management present at least once a year. security standards and operations. • Oversight of cyber incidents or risks which may have safety implications with potential impact on Corporate or Aviation Members of the Committee Members of the Safety and Security Review Board Safety. The Audit Committee comprises two Virgin appointed Non The Safety and Security Review Board is owned and led by Executive Directors and two Delta appointed Non Executive Virgin Atlantic’s Accountable Manager and primary Post Holder The Board receives regular updates and reports from the ISB Directors. As at 31 December 2020 the Committee members and is chaired by an independent third-party advisor to the and its Independent Chair. were Gordon McCallum (Chairman), Peter Norris, Glen Board. It is supported by Virgin Atlantic’s Nominated Post Hauenstein and Steve Sear. Steve Sear was replaced by Alain Holders and Safety and Security specialists across the Group. Members of the Information Security Board Bellemare on 11 February 2021. The Committee meets three times The Information Security Board is sponsored by the Chief a year or more often if required. Executive Officer and chaired by an independent third party advisor to the Board. Its other members comprise an Executive Board member and our Chief Information Officer. It is supported by representatives from the Leadership and technology teams.

52 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 53 Directors’ report Directors’ report continued

Directors’ report Registered number: 08867781

The Directors present their annual report and the audited VAA Independent Board observer Dividends Disclosure of information to Auditor financial statements for Virgin Atlantic Limited (“the Company”) Following the successful recapitalisation in September 2020, The Group did not pay a preference dividend during the year The Directors who held office at the date of approval of this and subsidiary companies (together with the Company, “the Klaus Heinemann was appointed on behalf of certain creditors (2019 paid £nil). The Directors did not declare or pay interim Directors’ report confirm that, so far as they are each aware, Group”) for the year ended 31 December 2020. The comparative as an independent board observer to Virgin Atlantic Limited’s ordinary dividends in respect of the year ended 31 December there is no relevant audit information of which the Company’s amounts are stated for the year ended 31 December 2019. subsidiary Virgin Atlantic Airways Limited. As part of his 2020 (2019: paid £nil). auditors are unaware and each Director has taken all the steps appointment as board observer he has rights to receive all board that he ought to have taken as a Director in order to make Pages 54-58 inclusive of this annual report comprise the materials and to attend and speak at Virgin Atlantic Airways The Directors recommend that no final ordinary dividend be paid himself aware of any relevant audit information and to establish Directors’ report that has been drawn up and presented in Limited board meetings, but does not hold any voting rights. in respect of the year ended 31 December 2020 (2019: £nil). that the Company’s auditors are aware of that information. accordance with English company law and the liabilities of the Directors in connection with that report shall be subject to the Share based payments: long term incentive plan Overseas branches Section 172(1) Statement limitations and restrictions provided by such law. The Group has a Long Term Incentive Scheme for Executive The Group operates services to a number of countries and Section 172 of the Companies Act 2006 requires a director Directors and other invited participants to incentivise and to facilitate this a number of overseas branches have been of a company to act in the way he or she considers, in good The Company was incorporated on 29 January 2014 as Virgin recognise execution of the Group’s strategic plan. The details of established in many of these countries. Virgin Atlantic has faith, would most likely promote the success of the company Atlantic (Holdings) Limited and changed its name to Virgin this share appreciation rights (cash settled) scheme can be found also established branches in countries to which it does not fly. for the benefit of its members as a whole. In doing this, section Atlantic Limited on 30 May 2014. The Group was formed as part in note 8. 172 requires a director to have regard to (amongst other of a reorganisation in March 2014 with the Company at its head. Political contributions matters) the: Results, business review and future developments No company in the Group made any political donations or The consolidated financial statements have been prepared using The results of the Group for the period are set out on page 64 incurred any political expenditure during the year (2019: £nil). • Likely consequences of any decisions in the long-term; the principles of merger accounting and present the results for and are commented on within the Strategic Report which is set • Interests of the company’s employees; the Group. out on pages 6-46. The Strategic Report also contains a review Going concern • Need to foster the company’s business relationships with of the business and the future developments. The Directors have satisfied themselves that it is reasonable for suppliers, customers and others; Directors and Directors’ interests them to conclude it is appropriate to adopt the going concern • Impact of the company’s operations on the community and The Directors who held office during the year were as follows: Employees basis for preparing these financial statements. The business environment; In considering applications for employment from disabled people activities, performance, strategy, risks and financial position of • Desirability of the company maintaining a reputation for high Sir Richard Branson (President) Virgin Atlantic seeks to ensure that full and fair consideration the Group are set out elsewhere in these reports and financial standards of business conduct; and Peter Norris (Chairman) is given to the abilities and aptitudes of the applicant against statements. The Directors have a reasonable expectation that • Need to act fairly as between members of the company. Gordon McCallum the requirements of the job for which he or she has applied. the Group has adequate resources to continue operating for the Ian Woods (resigned 20 January 2021) Employees who become temporarily or permanently disabled foreseeable future, although material uncertainties do exist that The Directors understand that how we behave matters, not only Edward Bastian are given individual consideration. Where possible equal may cast significant doubt on the Group’s ability to continue as a to our people, but also to the many stakeholders who have an Glen Hauenstein opportunities for training, career development and promotions going concern as set out in Note 3 to the financial statements. interest in our business. Steve Sear (resigned 11 February 2021) are given to disabled persons. Shai Weiss Auditors We believe that productive business relationships with our Tom Mackay (resigned 20 Sept 2020) Within the bounds of commercial confidentiality, information Pursuant to Section 487 of the Companies Act 2006, KPMG LLP suppliers, customers and other key stakeholders are key to the Cornelis Koster (VAA executive alternate, and then is disseminated to all levels of staff about matters that affect as existing auditors will be deemed to be reappointed and will ongoing success of the Group and that the interests of relevant Executive Director since 21 Sept 2020) the progress of our business and are of interest and concern to therefore continue in office. parties should be considered when making decisions that may Luigi Brambilla (Virgin nominated Director - appointed them as employees. Virgin Atlantic also encourages employees, impact them. Though engagement is carried out by those most 20 January 2021) where relevant, to meet on a regular basis to discuss matters relevant to the stakeholder or issue in question, the Directors Alain Bellemare (Delta nominated Director - appointed affecting them. receive updates on the engagement that has been undertaken, 11 February 2021) the reoccurring questions, concerns raised and the feedback Dwight James (Delta nominated alternate) provided by the Group’s key stakeholders. Juha Jarvinen (VAA executive alternate) Oliver Byers (VAA executive alternate - appointed 21 September 2020)

54 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 55 Directors’ report continued Directors’ report continued

Directors’ report Directors’ continued responsibilities statement

When making decisions the Directors take the course of action Statement Of Directors’ Responsibilities In Respect Of The The directors are responsible for keeping adequate accounting that they consider best leads to the success of the Group over Annual Report, Strategic Report, The Directors’ Report And records that are sufficient to show and explain the parent the long-term. When doing so, they also consider the interests The Financial Statements company’s transactions and disclose with reasonable accuracy of the stakeholders that we interact with. The directors are responsible for preparing the Annual Report, at any time the financial position of the parent company and Strategic Report, the Directors’ Report and the group and parent enable them to ensure that its financial statements comply with The Directors acknowledge that every decision made will not company financial statements in accordance with applicable law the Companies Act 2006. They are responsible for such internal necessarily result in a positive outcome for all our stakeholders and regulations. control as they determine is necessary to enable the preparation but by considering the Group’s purpose and values together with of financial statements that are free from material misstatement, its strategic priorities the Directors aim to make sure its decision Company law requires the directors to prepare group and parent whether due to fraud or error, and have general responsibility for is consistent and predictable. company financial statements for each financial year. Under that taking such steps as are reasonably open to them to safeguard law they have elected to prepare both the group and the parent the assets of the group and to prevent and detect fraud and We set out throughout the Strategic Report some examples company financial statements in accordance with international other irregularities. of how the Directors have had regard to the matters set out in accounting standards in conformity with the requirements of the section 172(1) (a) to (f) when discharging their section 172 duty Companies Act 2006 and applicable law. The directors are responsible for the maintenance and integrity and the effect of that on certain of the decisions taken by them, of the corporate and financial information included on the in particular on pages 26-27. Under company law the directors must not approve the financial company’s website. Legislation in the UK governing the statements unless they are satisfied that they give a true and preparation and dissemination of financial statements may By considering these matters the Directors have had regard to fair view of the state of affairs of the group and parent company differ from legislation in other jurisdictions. the matters set out in section 172(1) (a) to (f) of the Companies and of the group’s profit or loss for that period. In preparing Act 2006 when performing their duty under section 172. each of the group and parent company financial statements, the directors are required to: By order of the Board • Select suitable accounting policies and then apply them consistently;

• Mak e judgements and estimates that are reasonable, relevant and reliable;

• S tate whether they have been prepared in accordance with Julian Homerstone, Company Secretary international accounting standards in conformity with the requirements of the Companies Act 2006; Company Secretariat, The VHQ • As sess the group and parent company’s ability to continue as Fleming Way, a going concern, disclosing, as applicable, matters related to Crawley going concern; and West Sussex, RH10 9DF • Use the going concern basis of accounting unless they either 26 March 2021 intend to liquidate the group or the parent company or to Registered number: 08867781 cease operations, or have no realistic alternative but to do so.

56 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 57 Corporate Structure

Corporate structure Hit the mute button

We aren't throwing away Virgin Atlantic Limited (Company No. 08867781) the rule book, we're just

Virgin Atlantic Two Limited (Company No. 03553500) taking it on holiday

Virgin Travel Group Limited (Company No. 02274332) Connect Airways Limited (30%) In administration

Virgin Atlantic Airways Limited (Company No. 01600117)

Fit Leasing Limited (Jersey)

VA Cargo Limited (Company No. 02645535)

VAA Holdings UK Limited (Company No. 09744818)

VAA Holdings Jersey Limited

Virgin Atlantic International Limited (Company No. 09539561)

Virglease (3) Limited (Company No. 03791307)

Virglease (4) Limited (Company No. 12814173)

Virgin Holidays Limited (Company No. 01873815)

Virgin Incoming Services Inc (USA)

Virgin Vacations Inc (USA)

Notes: All companies are wholly owned by Virgin Atlantic Limited and are registered in England and Wales unless otherwise indicated.

58 Virgin Atlantic Annual Report 2020 Independent Auditor’s Report Independent Auditor’s Report continued

Independent Auditor’s Report

Independent auditor’s report to the members Material uncertainty related to going concern We performed the following procedures: Fraud and breaches of laws and regulations – ability to detect of Virgin Atlantic Limited We draw attention to note 3 to the financial statements which • Critically assessed assumptions in the ‘Plan of Record’ and Identifying and responding to risks of material misstatement indicates that under certain severe but plausible downside ‘Severe but plausible Case’ scenarios relevant to liquidity and due to fraud Opinion scenarios, as a result of the Coronavirus pandemic, and its covenant metrics, by comparing to external forecasts for the To identify risks of material misstatement due to fraud (“fraud We have audited the financial statements of Virgin Atlantic associated long term impact on air travel and leisure industries, aviation industry’s recovery from the impacts of the Covid-19 risks”) we assessed events or conditions that could indicate an Limited (“the company”) for the year ended 31 December 2020 there is a risk as to whether the group and parent company pandemic and economic forecasts, overlaying our knowledge incentive or pressure to commit fraud or provide an opportunity which comprise the Consolidated statement of comprehensive are able to meet liquidity requirements, such that they can of the company’s plans based on approved budgets and our to commit fraud. Our risk assessment procedures included: income, Consolidated statement of financial position and continue to operate as a going concern. The scenarios modelled knowledge of the company and the sector in which it operates. • Enquiring of directors, the audit committee, internal audit Company statement of financial position, Consolidated by the company assume a gradual return to passenger flying • We specifically challenged the assumptions underpinning the and inspection of policy documentation as to the company’s statement of changes in equity and Company statement of below historic levels, and includes all refinancing measures ‘Severe but plausible Case’ scenario prepared by the directors high-level policies and procedures to prevent and detect changes in equity, Consolidated statement of cash flows and completed to date. Note 3 sets out the uncertainties regarding to evaluate whether this represented a sufficiently severe but fraud, including the internal audit function, and the company’s related notes, including the accounting policies in note 3. the ongoing impacts of the Coronavirus pandemic and the plausible downside scenario. channel for “whistleblowing”, as well as whether they have directors’ assumptions for the resumption of passenger flying. If • We inspected confirmations from lenders of the level knowledge of any actual, suspected or alleged fraud. In our opinion: the UK enters into further national lockdowns over the Summer of committed financing, and the associated covenant • Reading Board and Audit committee minutes. • The financial statements give a true and fair view of the state of 2021 and Winter months and if travel restrictions continue for requirements. • Considering remuneration incentive schemes and performance of the group’s and of the parent company’s affairs as at 31 longer than expected during 2021 or into 2022 in the group’s key • We evaluated the achievability of the actions the directors targets for management and directors. December 2020 and of the group’s loss for the year then markets, the group may need to obtain additional funding in the consider they would take to improve the position should the ended; future to maintain liquidity. These events and conditions, along risks from the ‘Severe but plausible Case’ materialise, which We communicated identified fraud risks to all members of • The group financial statements have been properly prepared with the other matters explained in note 3, constitute a material include review and rationalisation of the group’s network, the audit team and remained alert to any indications of fraud in accordance with international accounting standards in uncertainty that may cast significant doubt on the group’s and an increased focus on the group’s Cargo business and new throughout the audit. conformity with the requirements of the Companies Act 2006; the parent company’s ability to continue as a going concern. route opportunities, further significant restructuring and • The parent company financial statements have been properly cost reduction activities, further deferral of expenditure and As required by auditing standards, and taking into account our prepared in accordance with UK accounting standards, Our opinion is not modified in respect of this matter. securing additional shareholder support, taking into account overall knowledge of the control environment, including the including FRS 101 Reduced Disclosure Framework; and the extent to which the directors can control the timing and impact on the company of the significant business disruptions • The financial statements have been prepared in accordance Going concern basis of preparation outcome of these actions. experienced as a result of the Covid-19 pandemic, we performed with the requirements of the Companies Act 2006. The directors have prepared the financial statements on the • W e considered whether the going concern disclosure in note 3 procedures to address the risk of management override of going concern basis as they do not intend to liquidate the to the financial statements gives a full and accurate description controls, in particular the risk that group management may Basis for opinion group or company, or to cease their operations, and as they of the directors' assessment of going concern, including the be in a position to make inappropriate accounting entries. We conducted our audit in accordance with International have concluded that the group and the company’s financial identified risks, dependencies, and related sensitivities. On this audit we do not believe there is a fraud risk related to Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. position means that this is realistic for at least a year from the revenue recognition because sales transactions are high volume, Our responsibilities are described below. We have fulfilled our date of approval of the financial statements (“the going concern Our conclusions based on this work: low value and non-complex in nature occurring in a largely ethical responsibilities under, and are independent of the group period”). As stated above, they have also concluded that there • W e consider that the directors’ use of the going concern basis automated, routine environment, thus reducing opportunities for in accordance with, UK ethical requirements including the FRC is a material uncertainty related to going concern. of accounting in the preparation of the financial statements is systematic material fraudulent revenue recognition to occur. Ethical Standard. We believe that the audit evidence we have In our evaluation of the directors’ conclusions, we considered appropriate; and We also identified a fraud risk related to impairment of assets in obtained is a sufficient and appropriate basis for our opinion. the inherent risks to the group’s business model and analysed • W e found the going concern disclosure in note 3 to be response to possible pressures to use favorable forecasts when how those risks might affect the group and company’s financial acceptable. determining the value in use of the assets, therefore avoiding a resources or ability to continue operations over the going potential impairment. concern period.

60 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 61 Independent Auditor’s Report Independent Auditor’s Report continued

Independent Auditor’s Report continued

In determining the audit procedures we took into account Whilst the company is subject to many other laws and Matters on which we are required to report by exception A fuller description of our responsibilities is provided on the the results of our evaluation and testing of the operating regulations, we did not identify any others where the Under the Companies Act 2006, we are required to report to FRC’s website at frc.org.uk/auditorsresponsibilities. effectiveness of some of the group and company-wide fraud consequences of non-compliance alone could have a material you if, in our opinion: risk management controls. effect on amounts or disclosures in the financial statements. • A dequate accounting records have not been kept by the The purpose of our audit work and to whom we owe parent company, or returns adequate for our audit have not our responsibilities We performed procedures including: For the failure, in certain instances, to meet required timescales been received from branches not visited by us; or This report is made solely to the company’s members, as a body, • Identifying journal entries and other adjustments to test all full for refunds discussed in the Strategic Report, we assessed • The parent company financial statements are not in agreement in accordance with Chapter 3 of Part 16 of the Companies Act scope components based on risk criteria and comparing the disclosures against our understanding from inspecting with the accounting records and returns; or 2006. Our audit work has been undertaken so that we might identified entries to supporting documentation. These included regulatory correspondence. • Certain disclosures of directors’ remuneration specified by law state to the company’s members those matters we are required those posted by senior finance management and those posted are not made; or to state to them in an auditor’s report and for no other purpose. with descriptions that could be indicative of a risk of fraud. Context of the ability of the audit to detect fraud or breaches • We have not received all the information and explanations we To the fullest extent permitted by law, we do not accept or • Evaluated the business purpose of significant unusual of law or regulation require for our audit. assume responsibility to anyone other than the company and transactions. Owing to the inherent limitations of an audit, there is an the company’s members, as a body, for our audit work, for this unavoidable risk that we may not have detected some material We have nothing to report in these respects. report, or for the opinions we have formed. Identifying and responding to risks of material misstatement misstatements in the financial statements, even though we have due to non-compliance with laws and regulations properly planned and performed our audit in accordance with Directors’ responsibilities We identified areas of laws and regulations that could auditing standards. For example, the further removed non- As explained more fully in their statement set out on page 57, reasonably be expected to have a material effect on the compliance with laws and regulations is from the events and the directors are responsible for: the preparation of the financial financial statements from our general commercial and sector transactions reflected in the financial statements, the less likely statements and for being satisfied that they give a true and fair experience and through discussion with the directors and other the inherently limited procedures required by auditing standards view; such internal control as they determine is necessary to management (as required by auditing standards), and from would identify it. enable the preparation of financial statements that are free from inspection of the company’s regulatory and legal material misstatement, whether due to fraud or error; assessing correspondence and discussed with the directors and other In addition, as with any audit, there remained a higher risk of the group and parent company’s ability to continue as a going Jonathan Downer (Senior Statutory Auditor) management the policies and procedures regarding compliance non-detection of fraud, as these may involve collusion, forgery, concern, disclosing, as applicable, matters related to going for and on behalf of KPMG LLP, Statutory Auditor with laws and regulations. intentional omissions, misrepresentations, or the override of concern; and using the going concern basis of accounting unless internal controls. Our audit procedures are designed to detect they either intend to liquidate the group or the parent company Chartered Accountants We communicated identified laws and regulations throughout material misstatement. We are not responsible for preventing or to cease operations, or have no realistic alternative but to 15 Canada Square our team and remained alert to any indications of non- non-compliance or fraud and cannot be expected to detect non- do so. London compliance throughout the audit. compliance with all laws and regulations. E14 5GL Auditor’s responsibilities The potential effect of these laws and regulations on the Strategic report and directors’ report Our objectives are to obtain reasonable assurance about 26 March 2021 financial statements varies considerably. The directors are responsible for the strategic report and the whether the financial statements as a whole are free from directors’ report. Our opinion on the financial statements does material misstatement, whether due to fraud or error, and to The company is subject to laws and regulations that directly not cover those reports and we do not express an audit opinion issue our opinion in an auditor’s report. Reasonable assurance affect the financial statements including financial reporting thereon. is a high level of assurance, but does not guarantee that an audit legislation (including related companies legislation), conducted in accordance with ISAs (UK) will always detect a distributable profits legislation, taxation legislation, UK Civil Our responsibility is to read the strategic report and the material misstatement when it exists. Misstatements can arise Aviation Authority regulations and Association of British Travel directors’ report and, in doing so, consider whether, based on from fraud or error and are considered material if, individually Agents regulations and we assessed the extent of compliance our financial statements audit work, the information therein is or in aggregate, they could reasonably be expected to influence with these laws and regulations as part of our procedures on the materially misstated or inconsistent with the financial statements the economic decisions of users taken on the basis of the related financial statement items. or our audit knowledge. Based solely on that work: financial statements. • We have not identified material misstatements in the strategic report and the directors’ report; • In our opinion the information given in those reports for the financial year is consistent with the financial statements; and • In our opinion those reports have been prepared in accordance with the Companies Act 2006. 62 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 63

Financial statements

Financial statements Financial statements 65 Consolidated statement statement of of Consolidated statement statement of of comprehensive income income financial position position for the the year year ended ended 31 December 31 December 2020 2020 As at at 31 31 December December 2020 2020

As at As at 31 December 31 December 2020 2019 For the year ended 31 December 2020 For the year ended 31 December 2019 Note £m £m Exceptional Ordinary Exceptional Non-current assets items and activities items and Ordinary fair value before fair value Intangible assets and goodwill 11 460.0 182.5 activities before movements exceptional movements exceptional items (note 7) Total items (note 7) Total Property, plant and equipment 12 1,951.7 2,228.0 Note £m £m £m £m £m £m Deferred tax 13 2.9 8.7 Total revenue 5 868.0 - 868.0 2,927.1 - 2,927.1 Investments 14 0.0 0.0 Physical fuel (184.6) - (184.6) (686.3) - (686.3) Derivative financial instruments 15 - 4.4 Fuel hedging (104.8) 104.8 - (17.8) 17.8 - Trade and other receivables 16 15.7 17.8 Airline direct operating costs (239.7) - (239.7) (592.9) - (592.9) 2,430.3 2,441.4

Aircraft costs (157.9) (25.1) (183.0) (173.2) (1.3) (174.5) Current assets

Holiday distribution, marketing and selling costs (118.0) (15.7) (133.7) (564.9) (14.4) (579.3) Inventory 17 30.3 38.8 8 Employee remuneration (277.4) - (277.4) (421.9) - (421.9) Trade and other receivables 16 162.0 288.3

Other operating and overhead costs (148.5) (89.1) (237.6) (176.1) (19.8) (195.9) Derivative financial instruments 15 2.0 20.2

Engineering and maintenance costs (100.0) - (100.0) (175.5) - (175.5) Cash and cash equivalents 18 114.8 352.6

Other depreciation and amortisation (64.4) - (64.4) (76.8) (0.3) (77.1) Restricted cash 18 76.6 96.5

Other income 13.2 - 13.2 30.8 - 30.8 385.7 796.4 Operating (loss)/profit (514.1) (25.1) (539.2) 72.5 (18.0) 54.5 Total assets 2,816.0 3,237.8

Profit on disposal of property, plant and equipment 3.1 15.9 19.0 1.4 - 1.4 Current liabilities Restructuring - (78.4) (78.4) - (10.4) (10.4) Borrowings 19 (110.8) (248.2)

Impairment of assets - (20.6) (20.6) - (40.5) (40.5) Trade and other payables 20 (346.4) (515.5) 3.1 (83.1) (80.0) 1.4 (50.9) (49.5) Deferred revenue on air travel and holidays 21 (263.4) (523.4) Finance income 3.3 - 3.3 10.7 - 10.7 Provisions 22 (39.7) (30.4) Finance expense (151.3) - (151.3) (107.0) - (107.0) Derivative financial instruments 15 (13.0) (34.1) Net finance costs 9 (148.0) - (148.0) (96.3) - (96.3) (773.3) (1,351.6) Fair value (losses)/gains on derivative contracts - (80.7) (80.7) 1.4 37.0 37.0 Net current (liabilities) (387.6) (555.2) Loss before equity accounted investees and tax 6 (659.0) (188.9) (847.9) (22.4) (31.9) (54.3) Total assets less current liabilities 2,042.7 1,886.2 Share of (loss) from equity accounted investees (10.1) - (10.1) (7.1) (2.3) (9.4) Non-current liabilities Loss before tax (669.1) (188.9) (858.0) (29.5) (34.2) (63.7) Borrowings 19 (2,368.6) (1,966.6) Trade and other payables 20 (192.0) (3.6) Tax (charge)/credit 10 (6.1) 9.0 Deferred revenue on air travel and holidays 21 (3.3) (1.9) Loss for the year (864.1) (54.7) Provisions 22 (54.6) (99.6) Other comprehensive income (items that will not be reclassified to the income statement): Derivative financial instruments 15 - (4.9) Exchange translation differences (0.7) (0.1) (2,618.5) (2,076.6) Other comprehensive income (items that may be reclassified subsequently to the income statement): Net (liabilities) (575.8) (190.4) (Losses)/gains arising during the year on cash flow hedges (0.2) 82.6 Equity Total comprehensive (loss)/income for the year (865.0) 27.8 Ordinary share capital 100.0 100.0 (Loss)/profits attributable to: Preference share capital 425.9 50.0 Hedging reserve 82.3 82.5 Owners of the company 27.7 Other reserves (269.0) (372.0) Non-controlling interests 0.1 Retained earnings (915.0) (50.9) 27.8 Total (losses)/profits (865.0) Equity attributable to owners of the Company (575.8) (190.4)

The profit/(Loss) for the year for the Company is £nil (2019: £nil). Non-controlling interests 24 - - All amounts relate to continuing operations. Total equity (575.8) (190.4) The notes on pages 70 to 121 form part of these financial statements. The notes on pages 70 to 121 form part of these financial statements. These financial statements were approved by the Board of Directors on 26 March 2021 and were signed on its behalf by:

Oliver Byers, Director. Registered number 08867781 64 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 65 Financial statements continued Financial statements continued 67

66 Consolidated statement Company statement statement of of ofConsolidated changes in equity statement of As at 31 December 2020 financial position position changes in equity for the year ended 31 December 2020 for the year ended 31 December 2020 As at 31 December 2020

As at As at Non- 31 December 31 December Ordinary Share Preference Hedging Other Retained controlling Total 2020 2020 Capital Share Capital Reserve Reserves Earnings Total interest Equity £m £m £m £m £m £m £m £m Note £m £m Non-current assets Balance at 1 January 2019 100.0 50.0 (0.1) (232.5) (223.5) (306.0) 0.9 (305.1) Investments 14 665.3 289.4 Bonus share issue, and subsequent capital - - - (139.4) 139.4 - - - 665.3 289.4 reduction Demerger of subsidiary (note 23) - - - - 87.9 87.9 86.9 (1.0) 0.1 Current assets Loss for the year - - - - (54.8) (54.8) (54.7) Trade and other receivables 0.1 - Exchange translation differences - - - (0.1) - (0.1) - (0.1) 0.1 - Other comprehensive income/(expense) for the - - 82.6 - - 82.6 - 82.6 year Total assets 665.4 289.4 Total comprehensive income/(expense) for the - - 82.6 (0.1) (54.8) 27.7 0.1 27.8 year Current liabilities Balance as at 31 December 2019 100.0 50.0 82.5 (372.0) (50.9) (190.4) - (190.4) Trade and other payables 20 (0.9) (0.8) Balance as at 1 January 2020 100.0 50.0 82.5 (372.0) (50.9) (190.4) - (190.4) (0.9) (0.8) Capital contribution - - - 103.7 - 103.7 - 103.7 Net current liabilities (0.8) (0.8) Preference share issue - 375.9 - - - 375.9 - 375.9 Net assets 664.5 288.6 Loss for the year - - - - (864.1) (864.1) - (864.1)

Equity Other comprehensive income/(expense) - - (0.2) (0.7) - (0.9) - (0.9) 100.0 Ordinary share capital 100.0 Total comprehensive income/(expense) - (0.2) (0.7) (864.1) (865.0) - (865.0) Preference share capital 425.9 50.0 Balance at 31 December 2020 100.0 425.9 82.3 (269.0) (915.0) (575.8) - (575.8) Retained earnings 138.6 138.6 664.5 288.6 The Group demerged a subsidiary in 2019. Virgin Red Limited (formally Virgin Group Loyalty Company Limited) was transferred via a dividend to the Group’s shareholders, Virgin Holdings Limited and Delta Airlines Incorporated. See note 23. The notes on pages 70 to 121 form part of these financial statements. The notes on pages 70 to 121 form part of these financial statements. These financial statements were approved by the Board of Directors on 26 March 2021 and were signed on its behalf by:

Oliver Byers, Director Registered number 08867781

66 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 67

Financial statements continued Financial statements continued

69

68

Consolidated statement Consolidated statement of Consolidated statement of of changes in equity cashflows cashflows As atop 31 December 2020 s o As at 31 December 2020 s at December

s u s r

or year ended or year ended December December rr p r p r srs rs o

ote m m ur Net cash from operating activities before exceptional items (715.7) ous sr ssu susu p ruo Adjustments for exceptional items 2.8 oss or r Balance at 31 December 2019 Net cash (used in)/from operating activities (712.9)

ur 100.0 50.0 - 138.6 288.6 urchase of property, plant and euipment rr sr ssu - 375.9 - - 375.9 (78.8) urchase of intangible assets (9.1) oss or r - - - - - roceeds from sale of property, plant and euipment and intangible assets 53.1 Balance at 31 December 2020 100.0 425.9 - 138.6 664.5 nterest received 3.3 nvestment in associate - Net cash used in investing activities (31.5) o up u p sr p us r r r o prr srs ssu u

orr srs o ou o r ssu rur ro o ps prr srs o o pus r o ayment of long term borrowings (57.0) Drawdown from revolving credit facility 216.2 op s orpor o ur oo Group pr r ss o o ayment of leases (56.4) rorso sr p o oss o orr srs o Group rp ur s o s ros r u ew borrowings 375.1 r sr p o op s rs o r o r u rsu p oruo o roceeds from asset financing arrangements - ro o urr orr srs o ew finance leases 2.0 urr prr srs o s srs r oan to associate (7.8) ssu s pr o sr or sr o ur roup o ops Group r susr r or r Group Net cash from financing activities 472.1 r o orr r o op was transferred via a dividend to the Group’s

rs o ss o sr r s ou Company’s rs o srors r os rs orpor o ssoo Net decrease in cash and cash equivalents (272.3) prr srs rr o o o s up rs oos o prr srs o o r o op prr srors r o r 449.1 uo r o ors o r uu s s prr o ps o orr srors ou p up o Cash and cash euivalents at beginning of year including restricted cash

prr s o p sro o op sr u ou p up o sr pru pus rrrs or ffect of foreign echange rate changes 14.6 r s o o p ous rus o r u o p o u Cash and cash equivalents at end of year (including restricted cash) 191.4

During the year, as part of the Group’s solvent recapitalisation, certain liabilities op r ps s rr rsr he notes on pages to form part of these financial statements r o o op susr s rsu rs ous ssu o srs r susu ruo o ss s o op prr srs p ssu o s srors or ps o s s or pro – r ssu o o prr os o ps o or pr o s ss srs r prr srs ssu u s o u ous urr pr r

68 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 69

Financial statements continued Financial statements continued

70

71 Notes forming part of the

otes forming part of the financial statements

As at 31 December 2020 financial statements

s at December

3. Accounting policies 3. Accounting policies continued 1. General information Due to the high level of uncertainty as to how the global aviation industry will irgin tlantic imited, the ‘Company’) and its subsidiaries (the ‘Group’) is As there is still significant uncertainty around the resumption of material levels of emerge from the Covid19 pandemic the Directors have also modelled a more principally a passenger airline with a significant tour operations component, Basis of preparation flying, the Directors have taken a prudent approach to assessing the epected n determining the appropriate basis of preparation of the financial statements for severe, but plausible downside scenario (the ‘Severe but plausible’ scenario). This operating primarily from the nited ingdom urther details on the nature of scenario. The sensitivities within this scenario (the ‘Plan of Record’) are more the year ended December , the Directors are reuired to consider whether includes assumptions relating to the estimates of the impact of factors including the Group’s operations and its principal activities can be found within the severe than the announcements made by the Government on 22 February the Group and Company can continue in operational eistence for the foreseeable ▪ he potential for further lockdowns over the summer and winter months, trategic eport on pages to 2021. he Plan of Record scenario includes the following assumptions future he oard has concluded that it is appropriate to adopt the going concern resulting in the grounding of our fleet. ▪ ravel bans in place in all key markets until at least une, with the S border basis, having undertaen an assessment of the financial forecasts with specific ▪ Phased return to mild travel restrictions across operated markets delayed he Company is a private limited company incorporated and domiciled in the remaining closed until uly 2021. consideration to the trading position of the Group and Company in the contet of the until arch 2022. nited ingdom under the Companies ct he address of its registered ▪ A further etension of travel restrictions and enhanced enforcement of the current Coronavirus pandemic (‘Covid19’), for the reasons set out below. ▪ Significant relaation of travel restrictions not coming into effect until herd office is given on page nonessential travel ban. immunity is reached in the relevant regions. Assumptions include some ▪ Full restrictions on overseas holidays until uly 2021. ince arch the Coronavirus pandemic has had a severe and unprecedented regions not reaching herd immunity until 2 2022 or beyond. 2. Statement of compliance with IAS ▪ Subdued passenger demand into 3 2021, reflecting uncertainty around impact on the whole aviation and travel sector or irgin tlantic this impact has he Group has prepared its consolidated financial statements in accordance with border reopenings and broader confidence in air travel. included a reduction of in passenger revenue In this ‘severe but plausible’ scenario our free cash levels would breach current international accounting standards in conformity with the reuirements of ▪ order restrictions start to be lifted in 3 2021, with a slow ramp up in liuidity and slot covenant levels in uly 2021. he Group would also be eposed to the Companies ct passenger revenue from 3 2021 onwards. he Directors secured a privately funded, solvent recapitalisation in eptember further working capital outflows through refunds because of the return of customer ▪ Some level of travel restrictions in place in all operated markets throughout which delivered a refinancing pacage worth cbn over the following months advance payments on cancelled departures. owever, in this scenario, and based on he separate financial statements of the Company were prepared in accordance 2021 with a phased return to mild restrictions from 3 2021. eperience to date, the Directors epect a significant portion of sales in advance will with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS ▪ A cautious approach to increasing passenger capacity in 3. ▪ ur shareholders are providing cm in support over the life of the plan be retained, in return for discount vouchers and offers on future departures. At 2 101”). In preparing these financial statements, the Company applies the his scenario results in 1 2021 passenger revenue at of 2019 and total 2021 including a m investment from irgin Group and the deferral of cm of February 2021 the value of forward sales across both the Airline and olidays recognition, measurement and disclosure reuirements of international revenues at 2 of 2019 levels. shareholder payments such as brand fees and related costs businesses was 32m of which around 99m related to departures from uly 2021 accounting standards in conformity with the reuirements of the Companies ct ▪ Davidson empner provided m of secured financing and our largest suppliers to the end of the year and a further 1m related to departures in 2022. , but maes amendments where necessary in order to comply with his scenario indicated that the unrestricted cash would be insufficient to ensure contributed an additional m by way of deferrals Companies ct and has set out below where advantage of the the survival of the business for at least the 12month period from arch 2021. In the unlikely event that this scenario transpires, the Directors considered additional disclosure eemptions has been taen owever, post the additional mitigating actions set out below the cash low point n addition, the Directors acted at pace to reduce the cost base and simplify the fleet potential mitigating actions. hese included under such a scenario would be 11m and the Group would meet liuidity and and networ, as well as delivering m in cost savings in with over m of ▪ Review and rationalisation of our network. he principal accounting policies adopted by the Group and by the Company are slot covenant reuirements, and continue to operate for the foreseeable future. recurring cost reductions ▪ Increased focus on our Cargo business and new route opportunities. set out in note ▪ Further significant restructuring and cost reduction activities. itigating actions already taken by the Group after the balance sheet date to At 31 December 2020, the Group’s financing consisted of total cash balances of ▪ Deferral of ependiture. secure this outcome include m including unrestricted cash of m t ebruary the Group had ▪ Securing additional shareholder support. ▪ he sale and leaseback of two aircraft which generated a net increase in total cash balances of m including unrestricted cash of m cash of 0m (with 110m of the proceeds being used to reduce our owever, there is no guarantee that the Directors will be able to mitigate all eternal debt with Davidson empner Capital anagement). his will o assess Going Concern the Directors have prepared a series of dynamic downside potential eventualities therefore the Directors consider the ‘severe but plausible’ support future liuidity through a reduction in interest payable. scenarios that cover rolling month financial forecasts for the Group, comprising scenario represents a material uncertainty and could cast significant doubt upon the ▪ n 1 arch 2021 we completed a further solvent recapitalisation finance profit and loss, balance sheets and proected cash flows through to arch Group’s ability to continue as a going concern. Notwithstanding this material package worth 10m. his package comprised ll scenarios also considered the impact of movements in the dollar echange uncertainty caused by the current Coronavirus pandemic, the Directors do not A further 9m shareholder funding from irgin Group. rate and the price of et fuel wo scenarios are ey for the assessment of going consider this additional ‘severe but plausible’ scenario to be likely. Further support from creditor groups, including operating lease concern the ‘Plan of Record’ and ‘Severe but plausible’ scenarios. lessors, totalling 3m. ased on the above indications the Directors believe that it remains appropriate to ▪ ther mitigations include prepare the financial statements on a going concern basis. owever, this material Further utilisation of the Government Coronavirus ob Retention uncertainty may cast significant doubt on the Group’s ability to continue as a going Scheme, with over 0 of our staff furloughed between anuary and concern and, therefore, to continue realising its assets and discharging its liabilities in April 2021. the normal course of business. he financial statements do not include any Proactively focusing on customer incentives to achieve at least a adustments that would result from the basis of preparation being inappropriate. c.0 rebook rate.

Continued suspension of discretionary overhead and cape spend.

Proactive management of the supplier cost base resulting in reductions in cash liability and future cost rates.

70 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 71

Financial statements continued Financial statements continued

72 73

Notes forming forming part part of the of the financial statements statements continued

3. Accounting policies continued Merger accounting and the merger reserve 3. Accounting policies continued during the accounting period eenue is recognised net o discounts air Prior to anuary , certain significant business combinations were passenger duty VA and other salesrelated taes and comprises Business combinations accounted for using the ‘pooling of interests method’ (or merger accounting), he Group presented the consolidated results o Virgin Atlantic Limited as i it or business combinations for which the acuisition date is on or after anuary which treats the merged groups as if they had been combined throughout the has always eisted as the Group applied the eemption aailable under Passenger revenue , the Group is reuired to use the acuisition method of accounting. nder current and comparative accounting periods. erger accounting principles for paragraph o assenger ticet sales net o passenger taes and discounts are recorded this method, the cost of an acuisition is measured as the aggregate of the these combinations gave rise to a merger reserve in the consolidated statement within deerred income until recognised as reenue when transportation consideration transferred, measured at acuisition date fair value, and the of financial position, being the difference between the nominal value of new he consolidated inancial statements hae been prepared using the principles occurs amount of any noncontrolling interest in the acuiree. shares issued by the Parent ompany for the acuisition of the shares of the o merger accounting or the inclusion o Virgin rael Group Limited since

subsidiary and the subsidiary’s own share capital and share premium account. although it did not meet all o the conditions o the Companies Act Unused ticets are recognised as reenue when the right to trael has epired or each business combination, the Group has the option to measure the non or merger accounting which is determined by the terms and conditions o the associated ticet controlling interest in the acuiree either at fair value or at the proportionate These transactions have not been restated, as permitted by the IRS share of the acquiree’s identifiable net assets. The ecess of the consideration Ancillary reenue comprising principally o baggage carriage adanced seat transitional arrangements. The merger reserve is also used where more than he Companies Act now superseded by the Companies Act was transferred over the fair value of the net assets of the subsidiary acuired is assignment commissions change ees and credit and debit card ees due to of the shares in a subsidiary are acuired and the consideration includes oerridden at the time to gie a true and air iew he Group arose through recorded as goodwill. cuisitionrelated costs incurred are epensed as the Group are recognised as reenue on the date the perormance obligation the issue of new shares by the ompany, thereby attracting merger relief under a reconstruction o a ormer Group which did not alter the relatie rights o incurred. is ulilled typically the date o transportation the ompanies ct and, from ctober , the ompanies ct . the ultimate shareholders o the Company’s subsidiaries and hence it was

The merger reserve is presented within other reserves on the statement of considered inappropriate to account or the transaction using acquisition Holidays revenue Transactions that do not result in a loss of control are treated as euity changes in euity. accounting principles which would hae been the required treatment i the he Group records reenue on a net basis ater deducting customer transactions with noncontrolling interests. Companies Act had not been oerridden Transitional impact of merger accounting discounts and alue added ta or reenue relating to trael serices

Interests in equity accounted investees During the year ended December irgin tlantic imited (formerly irgin arranged by the Group’s trael proiders the perormance obligation is the Virgin Atlantic Limited consolidated the results o Air igeria eelopment The Group’s interests in euityaccounted investees comprises interest in a oint tlantic (oldings) imited (())), acuired the Group formerly headed by proision o a holiday pacage this is treated as a single perormance Limited (ormerly Virgin igeria Airways Limited) rom the time it was set up in venture. oint ventures are those entities in which the Group has oint control irgin tlantic Two imited (formerly irgin tlantic imited). () was obligation which is deliered oer the duration o the holiday eenue is to August on the grounds that it had a equity shareholding over the financial and operating policies. Interests in oint ventures are accounted incorporated on anuary , with luebottle Investments () imited taen to the income statement on the date o holiday and light departure and eercised control oer the operating and inancial actiities o Air igeria for using the euity method. They are initially measured at cost, which includes (‘BIUK’) and Delta subscribing for and , respectively, of the Company’s this is deemed to materially relect recognition oer the duration o the eelopment Limited ince eptember Virgin Atlantic Limited’s equity transaction costs. Subseuent to initial recognition, the consolidated financial share capital, at par. () subseuently acuired irgin tlantic imited (‘VAL’) in holiday apart rom at the year end when an adustment is made to ensure inestment in Air igeria eelopment Limited has been accounted or as a statements include the Group’s share of the profit or loss and I of euity a shareforshare echange. reenue is recognised in the releant inancial year here the Group’s role in noncurrent inestment with a net boo alue o nil (note ) accounted investees. the transaction is that o an Agent reenue is recognised on a net basis with

The Group applied merger accounting in accordance with paragraph of reenue representing the margin earned he reenue is recognised on the he remaining subsidiaries hae been accounted or using the principles o RS , as the respective net assets remained unchanged following the date o booing acquisition accounting rsharesharefo echange. he Group receies grants rom local authorities in relation to its tour Revenue and revenue recognition operations business and in accordance with IA has accounted or these eenue is measured at the air alue o the consideration receied or as a deduction to epenses oer the period o the perormance obligation receiable and represents amounts receiable or goods and serices proided in the normal course o business

72 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 73 Financial statements continued Financial statements continued

74 75 Notes forming part of the otes orming part o te financial statements inancial statements continued continued

3. Accounting policies continued 3. Accounting policies continued en compensation is receied to speciically coer additional costs suered it Taxation ll other proits or losses arising on translation are dealt ith through the ill e netted against applicale lines in te income statement ere claims a on the proit or loss or the year comprises current and deerred ta Frequent flyer programme revenue income statement ny gains or losses arising on the retranslation o oreign related to te acuisition o an asset suc as aircrat do not relate to or miles earned y memers o te Group’s reuent lyer rogramme currency cash balances held in the shortterm to meet uture trading compensation or loss o income or toards incremental operating costs te Current Tax obligations are reported in the income statement ‘Flying Club’, an element o reenue representing te alue o te miles amounts are recorded as a reduction in te cost o te related asset to relect te he Group’s liability or current ta is provided at amounts epected to be issued is deerred until te miles are utilised e amount o te deerral is sustance o te transaction paid or recovered using the ta rates and las that have been enacted or ased on te redemption alue metod permitted under e Employee benefits substantively enacted by the balance sheet date he ta currently payable

Group’s reuent lyer programme ‘Flying Club’ allos customers to earn Translation of foreign currencies or receivable is based on taable proit or loss or the year aable proit mileage credits y lying on Virgin Atlantic and selected partner airlines as e consolidated accounts o te Group are presented in pounds terling Pension diers rom net proit or loss as reported in the income statement because ic is te Company’s unctional currency and te Group’s presentation he Group operates a deined contribution pension scheme he assets o the ell as troug participating companies suc as credit card issuers lying it ecludes items o income or epense that are taable or deductible in currency Certain susidiaries ae operations tat are primarily inluenced y a scheme are held separately rom those o the Group in independently Clu memers can redeem miles or arious reards primarily or te other years and it ecludes items that are never taable or deductible administered unds he amount charged to the income statement represents redemption on Virgin Atlantic ligts or selected partner airlines and oter currency oter tan terling partners suc as otels and car rental companies the contributions payable to the scheme by the Group in respect o the Deferred Tax or te purposes o presenting consolidated inancial statements te assets and accounting period eerred ta is provided in ull on all temporary dierences relating to the n accordance it ‘Revenue rom contracts it customers’, te liailities associated it te Group’s oreign susidiary undertaings are carrying amount o assets and liabilities, here it is probable that the apportioned standalone selling price o te aarded lying Clu mile in translated at ecange rates preailing on te alance seet date ncome and Share based payments recovery or settlement ill result in an obligation to pay more, or a right to as deerred as a liaility and recognised as reenue at te point te epense items associated it te Group’s oreign susidiary undertaings are pay less, ta in the uture, ith the olloing eceptions Long-term incentive scheme perormance oligation as een satisied y te Group typically ligt translated at te aerage ecange rate or te period cange dierences date uring te reuent lyer programme as demerged rom te arising i any are recognised in oter compreensie income and accumulated he Group accrues or any element o oreseeable uture aards or employees ▪ n respect o taable temporary dierences associated ith Group in shareholders’ euity n disposal o a oreign operation all o te and directors under s hich have been agreed by the oard o irectors, investments in subsidiaries or associates, here the timing o the accumulated ecange dierences in respect o tat susidiary attriutale to and hich are deemed to have been earned in the current period reversal o the temporary dierences can be controlled and it is areting reenue receied rom participating companies it te issuance te Group are reclassiied to te consolidated income statement probable that the temporary dierences ill not reverse in the he Group operates a cashsettled scheme, a liability is recognised or the o miles is recognised at te point or oer te period tat te perormance oreseeable uture and goods or services acuired, measured initially at the air value o the liability oligation as een satisied y te Group ransactions arising oter tan in te unctional currency are recorded using t each balance sheet date until the liability is settled and at the date o te rate o ecange ruling at te date o te transaction onetary assets and ▪ eerred income ta assets are recognised only to the etent that it settlement, the air value o the liability is remeasured, ith any changes in Compensation payments liailities denominated in oreign currencies are re translated using te rate o is probable more liely than not that taable proit ill be air value recognised in the income statement or the year ncome resulting rom claims or compensation payments liuidated ecange ruling at te alance seet date available against hich the deductible temporary dierences, damages is recognised as eiter income or as reduction o costs in te carried orard ta credits or ta losses can be utilised income statement ncome ill e recognised ere it is oer and aoe onmonetary assets and liailities denominated in oreign currencies tat are te costs suered en all perormance oligations are met including stated at air alue are translated at oreign ecange rates ruling at te dates eerred income ta assets and liabilities are measured on an undiscounted en a contractual entitlement eists it can e relialy measured and it is te air alue as determined onmonetary items tat are measured in terms basis at the ta rates that are epected to apply hen the related asset is proale tat economic eneits ill accrue to te Group o istorical cost in a oreign currency are not retranslated realised or liability is settled, based on ta rates and las enacted or substantively enacted at the balance sheet date

74 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 75 Financial statements continued Financial statements continued

76 77

osNotes or forming pr part o of the

financial ss statements

continued

3. Accounting policies continued Goodwill 3. Accounting policies continued rr sss s r os r s or r os o usss oo s r u ru he aane f airraft and engine st is dereiated n a straightine r o s o urr sss s urr s s o sss ur rsu oo s ps s or Property plant and equipment (‘PPE’) asis er erids f t tent ears s as t rede the st t o o s s o ss pr u r ors s rr u rert ant and eient is hed at st he r has a i f estiated resida ae at the end f that erid he effetie o ror nt reaing rert ant and eient ereiatin is aated t dereiatin rate er ann in reset f ne ide died airraft is Intangible assets rite ff the st ess estiated resida ae n a straightine asis ariate sss r os ors o sr ss or Agreements: Delta Air France-KLM transatlantic contract and brand er the eni ife f the asset r the erid f the ndering ease if r oo or r o oo license shrter esida aes and sef eni ies f assets are reieed r instaed engines aintained nder ‘payasgo’ contracts, the r o ors u s u or pr rr os o r o r rs o uur anna against reaiing aret aes fr eiaent aged assets and dereiatin ies and resida aes are the sae as the airraft t hih the u o s s r or pr s or oo s r ps ors o sr ss or dereiatin rates are adsted arding n a rsetie asis engines reate s russ rr u o ror o r s rs r o ss o o rr r r us o r he arring ae is reieed fr iairent hen eents r hanges in irraft and engine sares aired n the intrdtin r eansin f the Landing rights r s o o rr u s r or irstanes indiate the arring ae a nt e reerae and the feet as e as rtae sares rhased searate are arried as and rs ur ro or rs r ps r u o pr s or s russ rr atie iairent sses are shn as a redtin in the arring ae f are genera dereiated in ine ith the feet t hih the reate he uso usu r ou or os ss uu u o ror rert ant and eient r dereiates sh sares n a straightine asis s as t rede the st pr osss ps rs s ous r r aatin t estiated resida ae at the end f their sef ies he ors o sr ss or pro o rs he gain r ss n dissa f rert ant eient and intangie assets effetie dereiatin rate er ann in reset f rtae sares is r ps rs s r o ors s ruos Software after dedting an sts assiated ith seing dissing f r retiring the deendent n te pro s rs r prpu s s o os o purs or op o opur sor s spr reeant asset is regnised in the ine stateent ro o r rr s ps spr or ss sss ain interir difiatins inding thse reired fr rand hanges

r ors or pro o rs or sor s ors or Fleet and reanhes are dereiated er si t eight ears Group prous ors purs sos or r pro o s rs o sr ss opur sor airraft are stated at the fair ae f the nsideratin gien after taing usu oo s s rs ro sss r rr os ss uu orso ant f manufacturers’ redits r disnts n eeent f the st f a ne o sr rors rssss s oo seent sts sh as ngter sheded aintenane and ar airraft is attrited n aisitin t reaid aintenane f its engines o p s rs o erha f airraft are aitaised and artised er the ength f erid op pur o s s ps prou or pross anding gear and airfrae and is dereiated er a erid fr ne t ten ears rs op or rspr r or sos enefiting fr these sts ther reaeent sares and ther sts s or s Group s o s fr the date f rhase t the date f the net sheded aintenane eent so o rs or sos pro or reating t aintenane f feet assets inding aintenane rided su rsours o op op fr the nent s ‘grandfather rights’ or sos ou or nder ‘payasgo’ contracts) are harged t the ine stateent n Group sur r pur ru o pro s rsu o os ops purs sos r nstin r as inrred resetie ss ur s op pur ps us os o irraft and engine aintenane sts in reset f ar erhas f osr o oo r o ors rs r our r op pur s ros ned airraft hih are tia arried t at interas greater than ne ear s r su o u pr rs s pr o inaning sts inrred n rrings t fnd rgress aents n o s s ps s urr are aitaised and dereiated referene t their nits f eni rs G rr o o assets nder nstrtin rinia airraft are aitaised as inrred nstin tia hrs r setrs fn art f the initia st f ne r t the date f the airraft entering serie and is then inded as pur r o s up o rous rou sed airraft is treated as sh aintenane eenditre ased n its art f the asset rr o s r o o s s urr aintenane stats n aisitin and the rrent st f the aintenane eents

76 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 77 Financial statements continued Financial statements continued

78 79

Notesotes formng forming part part of te of the financialfnanca statements statements continued continued

ountin poliie continued onurrent aet eld or ale ountin poliie continued ao, e ease a a e reeasure e oo oncurrent assets are cassfe as e for sae en t s gy proae to suaos ance payments an opton payments mae n respect of arcraft an engne e spose of tn monts an te current carryng aue s to e e rouse asse s suseue epreae us e srae purcase commtments an optons to acure arcraft ere te aance s recoere prncpay troug sae as oppose to contnung use e for eo ro e oeee ae oer e useu e o e uer • ae e ease er epecte to e fune y ease fnancng or outrgt purcase are recore at sae assets are carre at te oer of carryng aue an far aue ess costs asse ease er or e reas e Group as ue resorao oss • oao reae o e assesse o e cost n current or noncurrent arcraft eposts n acuston of te reate to se ssets are not eprecate or amortse once cassfe as e for e r o use asse as reure see prosos po eoo o a opo e eerse arcraft, tese payments are ncue as part of te cost of arcraft an are sae • eeasuree e o resua aue eprecate from tat ate e Group preses rouse asses ‘property, pa a equipment’ uaraees mpairment o nonurrent aet e saee o aa poso • use o e es o e res are penture ncurre on mofcatons to arcraft uner eases, s eprecate t eac aance seet ate, te roup rees te carryng amounts of ts auae e re auses our a on a stragtne ass to a n resua aue oer a pero not eceeng te noncurrent assets to etermne eter tere s any ncaton tat tose eaurement o te leae liaility • aes ore eae rae, or ease remanng ease pero assets ae suffere an mparment oss f any suc ncaton ests, te e ease a s a easure a e prese aue o e ease aes ue ore urre recoerae amount of te asset s estmate n orer to etermne te paes a are o pa a e oeee ae, soue us anduildin aet in te oure o ontrution iture and ittin etent of te mparment oss f any) ecoerae amount s te ger of e rae p e ease rea aaae, or oerse e Group’s e oao ae, a rese sou rae s appe, e ungs n freeo an an ungs are eng eprecate oer a far aue ess costs to se an aue n use reea orro rae resu a ause o e r o use asse a ease pero of years, on a stragtne ass o eprecaton s proe n Lease paes ue e easuree o e ease a oprse respect of assets n te course of constructon or freeo an ant an irrat depoit e oo a macnery, ftures an fttngs are eprecate at te foong rates rcraft eposts are captase an represent eposts mae t arcraft manufacturers for future eery of arcraft or eposts mae t arcraft • e paes e Group preses ease aes ‘borrowings’ e • saee o aa poso tures an fttngs – on cost fnancers or operatng essors to proe securty for future mantenance arae ease paes a epe o a e su as L, or or ease payments a easure us e e ore a e oeee o ale and leaea ant an eupment – on cost e ease sae a easea rasaos ere e Group ses a omputer eupment – on cost eae • ous epee o e paae e essee uer resua aue e eases a arra, proe ees e rera o a sae an softare ease contracts, as efne y ‘Leases’, are recore on te aance uaraees a seet, eang to te recognton of a rgtofuse asset representng te • aes or opos o purase, or or era e ease e per , e Group easures e r o use asse ars otor eces on cost Group’s rgt to use an asset urng te term of te ease contract an a ease er rees ese opos ro e easea a e proporo o e preous arr aou o e asse a reaes o e r o use reae easeo mproements oer of usefu economc fe or pero ease aty reatng to te payment ogaton of ease e ease a s suseue easure ase o a proess sar o e e Group a sae as o ourre, e asse s reae o eaurement o te itoue aet aorse os eo aae see proper, pa eupe a gtofuse assets are measure at cost an comprse te amount eua to orrespo ae a reose uer te nta measurement of te ease aty, auste for f appcae) ease e a s rease arue eres resu ro e ncentes, nta rect costs ncurre for te arrangement of te contract, sou o e ease a a e e o e ease pero ort term leae and leae o loalue aet e Group estmate costs for returnng te ease asset to te conton reure y a as eee o o reose rouse asses a ease te terms of te contract, scounte to refect te present aue on nta • e a s reue ease paes ae aes or eases o oaue asses, a aue eua o or recognton ess a ,, a sorerer eases, a urao eua o or ess a os e Group reoses e ease

paes assoae ese eases as a epese o a srae ass oer e ease er

78 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 79 Financial statements continued Financial statements continued

80 81

Notes forming part of the financialotes orming statements prt o te continuedinni sttements continued

ountin poliie continued • ter omponent or mintenne inter s psse te trigger ountin poliie continued point su tt te Group is ontrtuy obige to rry out te he roup eere he o reoo reeue nentorie speiie wor in orer to meet te return onitions, u proision etruturin proiion h eo eh pero e eep or hoe rue nentories re stte t te ower o ost n net reisbe ue roision is or te ost o wor is reore eruur proo re reoe whe he roup h eeope eure r ue hrouh he oe ee me or obsoete, sowmoing or eetie items were pproprite ny u ee or p or he reruur h re epeo write o or speii eet type is onsiere to be n impirment rge eriatie inanial intrument and edin o te etent tt tis proision represents n inrese to ny hoe ee h w rr ou he reruur r o pee irrt inentory inues irrt prts wi re epenbe n non he roup ue rou ere rue o e proision rue or usge up to te trigger point, mintenne he p or ou eure o hoe ee he renewbe epoure o ore ehe e ue pre ere re r ere sset is reore witin property, pnt, n equipment e sset is euree o reruur proo ue o he re epeure rue re reoe ueue reeure epreite oer te epete perio to te net ie r ro he reruur whh Proiion r ue hrouh pro or o (‘FVTPL’). he ree o oe ompenstion point, or te en o te ese, wieer is sooner re hoe ou h re oh eer ee he reruur roisions re reognise wen te Group s present eg or onstrutie r ro he reuo o uh rue oue or hrouh he o oe wh he oo e o he e obigtion s resut o pst eent, it is probbe tt te Group wi be oe ee ere mintenne is proie uner ‘power by te hour’ ontrts n require to sette tt obigtion n reibe estimte n be me o te Property proiion mintenne is pi to mintenne proiers to oer te ost o te mount o te obigtion eeho po oerou ee proo re oue o whe ee ou o ppe o hee rue wor, tese pyments re epense s inurre he ere re h er p o he proo oe he roup oe o ue ere rue or r

e mount reognise s proision is te best estimte o te uw o he ou e o he oe ee purpoe onsiertion require to sette te present obigtion t te bne intenne eposits suppement rents wi re reunbe re reore seet te, ting into ount te riss n unertinties surrouning te s oter reeibes stimtes re require to estbis te iey utiistion o Paener delay ompenation a lo edin obigtion te irrt, te epete ost o mintenne e t te time it is epete proo e or peer opeo whe he roup h he roup ppe h ow he o er e he to our, te onition o n irrt n te iespn o ieimite prts ere oo o reopee uoer uer reuo roo re ore urre ore wh eaed airrat maintenane proiion su mintenne eposits re nonreunbe n te iey utiistion o te eure e o ow ee h e hor re e Group inurs ibiities or mintenne osts in respet o irrt trete irrt is not epete to trigger mintenne eent, te bne is eeme re epee o uw ro he wow whh eee o e he roup eere he eee o eoo reohp ewee s rigt o use ssets uring te term o te ese ese rise rom eg n irreoerbe n epense s inurre wit ny ssoite mintenne er opeo ree o ee or ee h re ree he he rue hee e e o he urre ou onstrutie ontrtu obigtions reting to te onition o te irrt proisions reue to reet te t tt te Group s rey pi or te euo ro reeue e wh erpreo oee o her repee h ow he hee ro ppe wen it is returne to te essor e Group s inue restortion osts in rete mintenne wor ouo puru o te rigt o use sset s require by onderiatie inanial aet e bses o estimtes re reiewe one e yer n so wen inanial intrument oere e re eee o e e whh he o e e e re reoe whe he roup o isrge tese obigtions, te Group wi eiter nee to ompenste te inormtion beomes ibe tt is pbe o using mteri nge or eere pe h re o uoe e re eoe pr o he oru proo o he ree rue essor or te eement o te ie o te omponent or mintenne inter to n estimte, su s renegotition o en o ese return onitions, wou hereore e e ‘loans and receivables’. uh oere ore wh rue rue re use, or rry out te mintenne e beore return o te irrt to te inrese or erese utiistion, or unntiipte nges in te ost o e re eure ore o u he eee ere reore r ue ueue euree o hoe essor ey mintenne series or owne irrt n engines, mor oeru eho e pre ue re oher reee rue he e hee e ree he eo o he epeniture is pitise n epreite by reerene to te units o eonomi onsumption, typiy ours or setors own rue e proisions reore n rge to te inome sttement re epenent ere oe reoe pp he eee ere re eep on te ie o te omponent or mintenne inter use n te iniiu or horer reee whe he reoo o ere wou e terms o te ese er

▪ o rge is reore uring te initi perio o ese greements were no ompenstion or mintenne is require prior to n b n

80 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 81

Financial statements continued Financial statements continued

82 83

oesNotes orin forming ar part o e of the inancialfinancial saeens statements continued

ountin poliie continued onderiatie inanial liailitie iniiant udement etimate and ritial aountin poliie eae laiiation nvesens in ei insrens are carried a cos ere air onderivaive inancial liabiliies are iniiall recorded a air vale he preparatio o iacial stateets reuires aaeet to ae he a lease sustatiall trasers all the ris ad reards o vale canno be reliabl easred de o siniican variabili in e rane o less direcl aribable ransacion coss and sbseenl a udeets estiates ad assuptios that aect the applicatio o policies oership to the Group the aircrat is treated as oed such leases reasonable air vale esiaes. aorised cos and inclde rade and oer aables borroins ad reported aouts o assets ad liailities icoe ad expeses hese iclude ut are ot liited to ad asset aced iace leasi and rovisions. neres eense on borroins is reconised sin estiates ad associated assuptios are ased o historical experiece ad arraeets deterii the appropriate classiicatio the a and a equialent e eecive ineres eod. orroins are classiied as crren arious other actors elieed to e reasoale uder the circustaces sustace o the trasactio rather tha the or is cosidered as or e roses o e cas lo saeen corises cas eld in liabiliies nless ere is an ncondiional ri o deer seleen o ctual results could dier ro these estiates ad the uderli actors cosidered iclude ut are ot liited to the olloi ban accons and one are deosis reaable on deand i no e liabili or a leas ons aer e balance see dae. assuptios are reieed o a ooi asis hether the lease trasers oership o the asset to the lessee access resricions less overdras aable on deand. erain leases conain ineres rae sas a are closel relaed o the ed o the lease ter the lessee has the optio to purchase the e nderlin inancin and as sc are no acconed or as an eisios to accouti estiates are recoised i the period i hich the asset at the price that is suicietl loer tha the air alue o the as eivalens are crren asse invesens ic are readil converible ebedded derivaive. estiate is reised i the reisio aects ol that period or i the period o exercise date the lease ter is or the aor part o the ecooic ino non aons o cas a or close o eir carrin vales or raded in the reisio ad uture periods i the reisio aects oth curret ad uture lie o the asset ad the preset alue o the iiu lease an acive are io crailin or disrin e bsiness. ereonition o nonderiatie inanial liailitie periods paets aouts to at least sustatiall all o the air alue o the Te ro dereconises inancial liabiliies en and onl en e Group’s leased asset etrited a obliaions are discared cancelled or e eire. ere an eisin he olloi accouti policies are cosidered critical accouti policies as esriced cas reresens nds eld b e ro in ban accons ic inancial liabili is relaced b anoer ro e sae lender on sbsaniall the reuire a siiicat aout o aaeet udeet ad the results are canno be idran nil cerain condiions ave been lilled. Te laiiation o inome and epene eteen eeptional and underlyin dieren ers or e ers o an eisin liabili are sbsaniall odiied aterial to the Group’s iacial stateets areae resriced nds balance is disclosed in ese inancial saeens item (note ) sc an ecane or odiicaion is reaed as a dereconiion o e oriinal and is classiied as a crren or noncrren asse based on e esiaed he Group sees to preset a easure o uderli perorace hich liabili and e reconiion o a ne liabili sc a e dierence in e reainin len o e resricion. is ot ipacted aterial orecurri ites or ites hich are ot resecive carrin aons are reconised in e incoe saeen. eaed airrat maintenane proiion (note ) cosidered to e relectie o the tradi perorace o the usiess or aircrat treated as riht o use assets the Group has a coitet to mpairment o nonderiatie inanial aet his easure o profit is described as ‘profit before tax and exceptional orroin ot retur the aircrat i a speciic aiteace coditio at the ed o the lease Te ro assesses a eac balance see dae eer a non derivaive ites’ ad is used the irectors to easure ad oitor orroin coss direcl aribable o e acisiion consrcion or ter stiati the proisio or aiteace costs reuires udeet as inancial asse or ro o inancial asses is iaired. performance. The excluded items are referred to as ‘exceptional’ items. rodcion o aliin asses ic are asses a necessaril ae a to the cost ad tii o uture aiteace eets his estiate is ased

sbsanial eriod o ie o e read or eir inended se or sale are o plaed usae o the aircrat cotractual oliatios uder lease Te ‘expected credit loss’ approach is aen en calclain iairens on xceptioal ites a iclude ipairets expediture o aor added o e coss o ose asses nil sc ie as e asses are areeets idustr experience, manufacturers’ uidace ad reulatios inancial asses. ll inancial asses are revieed or isoric rieos and is restructuri proraes air alue adustets o iacial sbsaniall read or eir inended se or sale. nvesen incoe earned chae i these assuptios could potetiall result i a siiicat roorion is alied o is class o inancial asses o calclae e reired istruets ad other particularl siiicat or uusual orecurri on e eorar invesen o seciic borroins endin eir chae to the aiteace proisios ad costs i uture periods rovision. ites tes relati to the oral tradi perorace o the usiess eendire on aliin asses is dedced ro e borroin coss eliible ill alas e icluded ithi the uderli perorace or caialisaion. eidual alue and ueul eonomi lie o aet (note ) ereonition o nonderiatie inanial aet he Group exercises udeet to deterie useul lies ad residual alues Te ro dereconises a inancial asse onl en e conracal ris o e udeet is reuired i deterii the classiicatio o ites etee ll oer borroin coss are reconised in e incoe saeen in e o propert plat ad euipet he assets are depreciated to their residual cas los ro e asse eire or i ransers e inancial asse and exceptioal ad uderli lie ith iacial eporti oucil eriod in ic e are incrred. alues oer their estiated useul lies sbsaniall all e riss and reards o onersi o e asse o anoer eni. uidace the Group hae ot attepted to ideti additioal exceptioal ites as a direct or idirect result o oid other tha those ites hich clearl eet our existi deiitio o exceptioal such as the restructuri ad asset ipairet

82 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 83 Financial statements continued Financial statements continued

84

85

otes formin part of the Notes forming part of the financial statements financial statements continued continued

nalyi o reenue operatin (lo)proit and net (liailitie)aet o eore ta or te year oss or r s rr r r oo

Group

eenue or ear ended or ear ended ecember ecember

Group op m m or r or r or r or r r r assener ,. r r

aro . olidas . pro o propr p up o () ther . ,. orso o sss o () peratin (lo)proit oruo o pso ss ()

assener, caro and holidas operations () . uro o uors r ssos ther includin intraroup eliminations . u srs () ()

() . r srs () et (liailitie)aet assener, caro and holidas operations () . s p o Company’s uor s ssos or u srs r s p o Group’s uor s ssos or srs ther and intraroup eliminations () . or suor u o op susrs r s oos () .

ee payale or has been represented to be consistent ith current ear presentation.

ther includes income from enineerin and other reenue incidental to the primar operations of the Group. Group The ompan had no income in the current ear nil. or r or r r r eoraphical analsis of the Group operatin profit is not disclosed, as it is neither practical nor meaninful to allocate the Group’s operatin expenditure on a eoraphical basis. ince the aircraft fleet hich is the maor reenueearnin asset of the Group is emploed flexibl across a orldide route netor, there is no op () suitable basis of allocatin such assets and related liabilities to eoraphical areas and accordinl no eoraphical analsis of assets or net liabilities is disclosed. () r ou srs r ssur srs () o s or or srs ()

84 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 85

Financial statements continued Financial statements continued 86 87

os ormn par o

Notes forming part of the nana samns financial statements continued

continued

Eeptional item pona ms nu n oss or a nu oon Group or yar n or yar n mr mr m m oss () rra onrsp oss mparmns () one of the Group’s office locations u n rass o ar au ans osss on ras or ra ans osss rass o ar au ans osss on ras () ass rom or opran nom pns ass rom sruon marn an sn oss sruurn an rapasaon oss () ro on sposa o propry pan an upmn as part of the Group’s solvent ar o oss rom uy aoun nss n o a souns r ar au osss ans on ras () which were part of the Group’s London Gatwick hub and Virgin nras osss on or payas () r mparmns o nana asss ()

() e air alue (loe) ain on deriatie an e analyed a ollo oss an on ar au momns oss an on u ras s urn yar rass – s ao () Gan on or ras s urn yar rass – s ao ()

86 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 87 Financial statements continued Financial statements continued 88 89

otes foring part of the Notes forming part of the financial stateents financial statements continued continued

Employee remuneration (ii) reate Directors’ remuneration urig the yearperiod of their service the eoluets of the irectors 0 of the roup ad opay were (i) ead ount and total remuneration roup he average onthl nuber of eploees shown as full tie euivalent including eecutive irectors was or year eded or year eded eceber eceber 00 0 Group otal emolument nuber nuber ggregate eoluets anageent and adinistration opay cotributios to oey purchase pesio schees 0 light crew ggregate aouts receivable uder og er cetive chee 0 abin crew eservations and sales iet paid iretor ngineering cargo and production ggregate eoluets ad other beefits opay cotributios to oey purchase pesio schees 0 ggregate aouts receivable uder og er cetive chees 0 t eceber total headcount was at eceber he aggregate paroll costs including irectors of these persons were as follows

Group etireet beefits are accruig to 0 irectors uder oey purchase pesio schees urig the year a aout of il 0 0 was paid to shareholders i respect of the services of certai shareholderappoited oecutive irectors of the opay ages and salaries ocial securit costs he irectors are cosidered to be the key aageet persoel of the roup ther pension costs (iii) og ter icetive schee 00 the roup established a ew log ter icetive schee for ecutive irectors ad other ivited participats to icetivise ad recogise eecutio of the ‘Velocity’ pla he schee cosists of a cash payet at the ed of the three year ter of the grat ayets are based o the Group’s perforace agaist pre ncluded within olida distribution arketing and selling costs within the tateent of oprehensive ncoe are eploee costs aounting to agreed fiacial ad ofiacial easures which are liked to the Group’s log ter obectives which relate to retail staff costs cluded above are cash payets ade to directors relatig to services redered durig 00 he Virgin tlantic Liited Group operates a defined contribution pension schee he pension cost charged to the incoe stateent for the ear represents contributions paable b the Group to the schee he assets of the schees are held separatel fro those of the Group in independentl adinistered funds here were outstanding contributions of at eceber

uring the ear the Group ade use of the oronavirus ob etention chee ipleented b the governent where those eploees designated as being “furloughed workers” are eligible to have 80% of their salary costs paid up to a aiu of per onth he total aount of such relief received b the Group aounted to nil and is offset within eploee reuneration within the stateent of coprehensive incoe and within the figures above he eploee figures above include those on furlough during the ear

he opan has no salaried eploees nil

88 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 89 91

Financial statements continued Financial statements continued 90

Notesotes ori forming prt part o te of the

icils stteets financial statements continued continued

et ice costs lysis o te t epese uri te perio

Group Group or yer ee or yer ee or yer ee or yer ee eceer eceer eceer eceer rret t ice icoe ustets i respect o prior perios eposits o curret t liste iestets ote terest o lo to euity ccoute iestee otl curret t crecreit outs ue ro Group copies Deerre t riitio reersl o tii iereces

ice eese ustets i respect o prior perios outs ue to Group copies otl eerre t crecreit terest o leses ote 08 crecreit ter ice cres terl los ote 96

terest cpitlise o ircrt proress pyets ote e str rte o corportio t or te perio is espite loss or te Group tere is t cre or te perio ic is rie y eerre t ssets ot recoise peret iereces et ice costs

90 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 91 Financial statements continued Financial statements continued

92 93

otes ori prt o te Notes forming part of the

icil stteets financial statements

continued continued

continued tie ssets ooi e ctul curret t crecreit or te perio iers ro tt copute y pplyi te

str t rte to te proit eore t s recocile elo Group Group or yer ee or yer ee rs eceer eceer r r sss ur Goo r s s osruo o

oss eore ttio ost ur t te str rte t os ctors ecti te creit or te er pr sposs coe ot suect to corportio t ssos peses ot euctile or t purposes r ects o ierece i eerre t rte ortistio ie sset iereces ustets i respect o prior perios ur Goeret relies orso eret iereces pr urret t euctio ere eerre t ot recoise o optio o sposs ecoitio o eerre t ot recoise o optio o r ecoitio o preiously urecoise eerre t rri ot otl curret t creit cre r

rri ot

e eerre t sset t eceer s ee clculte se o is ill reuce te Group’s uture curret t cre ccorily r

ur r Group r o rs ss o s ro o rr r r s o us r r os rs os o o rr ss s ors or s or r o rs r ss s ors or s or r o rs

ur r so s o o or our os o usors o orr oo ur u ro o s or purs r or our os s s ror u r o

92 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 93 Financial statements continued 94 Financial statements continued

95

os or pr o

Notes forming ss part of the financialcontinued statements

continued

tie ssets ooi continued Assumptions: roert t eiet

r G os G Group u pr r s ou o sss r sou r ircraft, rotable spares ssets under oo pr r s rr ou and ancillary euipment ther construction Total level of a ‘cashgenerating unit’ (CGU), defined as the smallest identifiable r ro r wned eased wned eased roup o sss s sso sss r o rs or r ro m m m m m m

s os r r p o s os ro or r pp ost sss or roups o sss t anuary ,. ,. . . . ,. rs dditions . . . . . . s ss r Group s o Gs u prs isposals (.) (.) (.) (.) (.)

eclassifications . . (.) s r rou or oprs rs ss o r ther movements (.) (.) (.) r r r o ur srs rr sou r s u s o r os o spr s r sss s p o Group us r pus r r urr t ecember sruur o Group G ur o p o o os usss oprs ss o r os r ccte erecitio ss s u r sors r oo o Group s us s os or s urs rr t anuary . ,. . . ,. u Gs r sss r o p o oru sou r epreciation for the year . . . . . s os o uur opros sp rr ro rr mpairments . . . . . ps su s o rr o or urr pr r o pr or r G s u us s rr rr u o pr isposals (.) (.) (.) (.) (.) s p o o p o pssr r t ecember os oo s rsu pr rr ur esitiit sis rri ot r s su pr r s ou o o r o usss Gs r r o pr rrs Group has conducted sensitivity analyses on each CGU’s value in use. This t ecember u r rs sou rs ru r ro r or t ecember ,. . . . . ,. ru p uur s os rou s o o ror ous o s Gs sur s o rs rou o r r ss ssupos pp o r u us us sou s o o s o uos r s ou o s r osr o rso poss u o proos r s o orss ppro or or ther movements relate to lease etensions which do not constitute a new lease addition pursuant to , and in addition relate to asset adjustments resulting

year period, and projections are in line with the Group’s strategic plans rs sou r ps from variable lease rentals which are lined to the prevailing at a point in time as per the lease agreements. ror ro o p uo o r ro r pp r r ps During 2020 the IASB issued ‘Covid related rent concessions – amendment to IFRS 16 Leases’ to provide a practical expedient to lessees from applying IFRS 16 rs ors us r guidance on lease modification accounting for rent concessions for those lease modifications arising as a direct result of Covid. The Group has applied this practical epedient on all ualifying modifications in the preparation of the consolidated financial statements. The net impact on the income statement for has rs u pr been a credit of . million reflecting the changes to lease payments that arose from such concessions.

o o u rso poss sros s o rsu ithin ther ovements is an adjustment on eased ircraft resulting from rent deferrals for which the Group could not apply the IASB ‘Covid related rent pr r o Gs concessions – amendment to IFRS 16 leases’ practical expedient. On 10 March 2021 the IASB approved an extension to amend IFRS 16 eases to allow a oneyear extension to the practical expedient available to lessees when accounting for ‘Covidrelated rent concessions’. The IASB agreed to extend the relief to rent

concessions that reduce lease payments originally due on or before une . owever this is subject to U endorsement and as such as at the date of

approval of these inancial tatements is not yet available to the Group. n the current period the Group has adopted the original amendment to eases, with no effect on our eased ircraft. The Group will determine whether it will apply the etension once endorsed by the U.

94 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 95 Financial statements continued Financial statements continued

96 97

otes forming part of the Notes forming part of the financial statements financial statements continued continued

roert t eiet continued Deerre t he foon are the atera eferre ta assets an ates reonse the Group an oeents thereon urn the urrent an pror ear eferre taaton s During the year the roup too delivery of three Airbus 01000 two under lease arrangements and one owned. proe for at

Part of the Group’s response to the ovid1 pandemic has been to rationalie the aircraft fleet as a result five Boeing 00 aircraft were returned to the lessor early. Group The recoverable amount of the right of use assets were determined to be ero and they were written down in full. A further two 00 aircraft were sold and all remaining spares and ancillary euipment were also written down to nil leading to a full year impairment charge of 26.6m 201 nil. or ear ene or ear ene eeer eeer The total profit on the disposal of aircraft above was 11.0m 201 1.m relating to disposal of aircraft. Further write downs were also made to property and euipment in locations such as airport facilities offices and retail spaces which will no longer be used as a result of the pandemic. eerate apta aoanes

ther tn fferenes The impact of the pandemic on the aviation industry has given rise to an impairment trigger and as such management has conducted an impairment review. lease refer ta osses to note 11 for details. The review has not led to any impairments at an airline or holidays’ business level 201 nil. ooer reef

Included in aircraft rotable spares and ancillary euipment are progress payments of 21.m 201 .1m. These amounts are not depreciated.

Interest capitalised by the roup and ompany on aircraft progress payments included in additions during the year amounted to .0m 201 .2m. he roup has restrte ts reonton of eferre ta assets to eua the aount of eferre ta ates at the pero en as pertte he ross teporar fferenes not reonse the opan tota hh euates to a eferre ta asset not reonse of

The roup holds certain owned assets as collateral against the RF term loan facility. This includes one owned aircraft and eight engines 201 two owned aircraft eight reuton n the orporaton ta rate to effete as sustante enate n hs reuton as reerse n the nane t engines. enate on hh has e to the reeasureent of the eferre ta aanes at a rate of he nrease n the rate of eferre ta has nrease the ta hare for the ear The ompany did not have any property plant and euipment 201 nil. n arh the oernent announe ts ntenton to rase the orporaton a rate to ne the rate hane has een enate ths nrease the value of the group’s deferred tax assets.

he net eferre ta oeent n the stateent of fnana poston s as foos

oeet i eerre t sset

aane at anuar hare to stateent of oprehense noe aane as at eeer

he opan not hae an eferre ta n

96 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 97

Financial statements continued Financial statements continued 98 99

otes forg part of the faalNotes forming stateets part of the

continuedfinancial statements

continued

estets Deritie ici istrets e ooin te isoses te rrin mounts n ir vues o te Group’s derivative inni instruments erivtives re esinte s e or trin n re

not in esinte ee ountin retionsip roup opa

or ear eded or ear eded or ear eded or ear eded eeer eeer eeer eeer Group or er ene or er ene eemer eemer estets

vestet rle roup ted . m m ocrret ssets terest susdares . orein urren . . ue he ulsted vestet represets the Group’s investment rle roup ted hh ossts of eut held at ost of . or further forato rret ssets o the susdares of the roup see ote . orein urren opa ue vestet susdares

rret iiities alae at auar orein urren ue ddtos durg the ear alae at eeer ocrret iiities

orein urren ddtos durg the ear relate to aptal otrutos ade to susdares as a result of the ovato of erta laltes fro the susdares to the opa see ue tateet of hages ut.

Group untit untit miion miion oi ots orein urren orein urren ter represente in G ue rres

98 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 99

100 101 Financial statements continued Financial statements continued

otes ori part o te

iaia stateets Notes forming part of the financialcontinued statements

continued

Deritie ici istrets continued re oter receies e Group eters ito derivative trasatios uder aster etti derivatives are preseted ross as te osetti riteria ave ot ee et areeets der su areeets te aouts oed ea or ear eded or ear eded is is due to te Group ot avi a ea eoreae rit to oset eeer eeer outerpart o a sie da i respet o a trasatios outstadi are reoised aouts as te rit to oset is otiet o uture evets or areated ito a sie et aout tat is paae oe part to te eape deaut or oter redit evets oter ertai irustaes or eape e a redit evet su as a ocrret ter reeivaes deaut ours a outstadi trasatios uder te areeet are e ooi tae disoses te arri aouts o derivatives reoised i teriated e teriatio vaue is assessed ad o a sie aout is te Group stateet o iaia positio tat are suet to aster etti rret paae i setteet o a trasatios arraeets ut are ot set o due to osetti riteria ot ei et rade reeivaes rovisio or doutu reeivaes Group et trade reeivaes Gross aout out ot set o et aout reitted as ter reeivaes or te er ee Deceer rued ioe erivative iaia istruets Group reie reeivaes ssets repaets iaiities aaes ave ee represeted to e osistet it urret ear presetatio

Group rade reeivaes disosed aove are assiied as oas ad reeivaes ad are tereore easured at aortised ost

Gross aout out ot set o et aout or te er ee Deceer ei o st e t ot iire receies erivative iaia istruets das ssets das iaiities das das das deterii te reoveraiit o a trade reeivae te Group osiders a ae i te redit uait o te trade reeivae ro te date redit as iitia rated e opa did ot od a derivative iaia istruets i up to te reporti date e oetratio o redit ris is iited due to te ustoer ase ei are ad ureated e arri aouts o trade ad oter reeivaes are approiate eua to teir air vaue

etories

or ear eded or ear eded eeer eeer

irrat osuae spares it sto ue

osuae spares ave redued duri te ear due to ipairets aaist ivetor reated to oei ad irus airrat i ave ee reoved ro servie ad eiter sod or retured to teir essors – see ote e opa did ot ave a ivetories i

100 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 101 Financial statements continued Financial statements continued

103 102

Notes forming part of the financial statements continued continued

s cs eiets restricte cs orrois cotie

i. ii.

iii. iv.

orrois sis o orrois crrec s t Deceer

– ocrret – sis o orrois crrec s t – Deceer – – rret –

– –

–

102 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 103

Financial statements continued Financial statements continued

105 104

Notes forming part of the

financial statements

continued

continued

orrois cotie re oter es

sis o ese et trit s t Deceer ocrret sis o ese et trit s t Deceer rret

104 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 105 106

Financial statements continued Financial statements continued

107 Notes forming part of the financial statements continued

Deerre reee o ir tre ois roisios

Group

m m

ocrret aintenane . nerous leases . easehol ilapiations . estruturing osts . rret aintenane . nerous leases . easehol ilapiations . egal laims .

estruturing osts .

Group’s airlines through their loyalty programmes. aintenane inlue in proisions relates to the osts to meet the ontratual return onitions on airrat treate as right o use assets. ash outlos on airrat an engine maintenane our hen the maintenane eents tae plae on uture ates not eeeing une . he utilisation uring the year inlues m relating to the return o the ie lease oeing s. aintenane proisions are isounte only hen the interest rate has a eeme material impat on the proision.

106 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 107 Financial statements continued Financial statements continued 108 109

otes orming part o the Notes forming part of the

inanial statements financial statements continued

continued

roisios cotie terest i ssiiries ssocites

he group onsists o a parent ompany irgin tlanti imite inorporate in the an a numer o susiiaries hih operate an are inorporate aroun the orl. he Group operates rom a numer o properties here the osts inole ith ulilling the terms an onitions o the lease are higher than the amount o eonomi he susiiaries o the Group as at eemer are eneit reeie. uh proisions represent the rent an oupanyrelate epenses hih ill e inurre ater these properties hae een aate until the en o the lease term. ountry o inorporation easehol ilapiations represent proisions hel relating to lease lan an uilings here restoration osts are ontratually reuire at the en o the lease. here or registration rinary issue shares rinipal atiity suh osts arise as a result o apital epeniture on the lease asset the restoration osts are also apitalise. siiries ssocites irgin tlanti o imite nglan an ales oling ompany egal laims represent the estimate outstaning ost arising rom the settlement o iil ations. nlue ithin legal laims are ompensation amounts ue to ustomers irgin rael Group imite nglan an ales oling ompany hose lights ere signiiantly elaye unless the airline an proe that the elay as ause y irumstanes eyon its ontrol. irgin tlanti irays imite nglan an ales irline operations he ompany i not hae any proisions nil. irgin oliays imite nglan an ales ale o holiays araos nterprises pl nglan an ales nestment ompany it easing imite ersey easing o airrat argo imite nglan an ales ease traing olings ersey imite ersey oling ompany Group olings imite nglan an ales oling ompany

irgin tlanti nternational imite nglan an ales raing nerous easehol estruturing aintenane ontrats ilapiations egal laims osts otal irgin noming eries norporate nite tates o meria ease traing m m m m m m irglease imite nglan an ales ease traing s at anuary . . . . . . irglease imite nglan an ales easing o airrat onnet irays imite nglan an ales irline operations mounts proierelease in the year . . . . iiict ois mounts utilise in the year . . . . . ir igeria eelopment imite igeria irline operations ther moements . . . . ormerly irgin igeria irays imite

s at eemer . . . . . siir ssocites eistere ice resses s at anuary it easing imite olings ersey imite splanae t elier ersey . . . . . mounts proierelease in the year . . . . . mounts utilise in the year irgin aations n irgin noming eries n inelan oa uite rlano loria . . . ther moements araos nterprise 35 Great St Helen’s, London EC3A 6AP s at eemer onnet irays imite ore onon lae onon

ll other traing susiiaries he anor oyal raley est usse

108 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 109 Financial statements continued Financial statements continued 110 111

otes orn art o te Notes forming part of the

nanal stateents financial statements continued continued

rn aatons nororated eased tradn on 3 ar Deerer o ssiir ete rt trsctios A Caro Lted eased tradn on 3 ne and rlease 3 Lted n 3 ar te Gro deered a ssdar, rn ed Lted Group rsos orr ours o usss ur r r r r prs reosl rn Gro Loalt Coan, ad a nonontrolln eased tradn on 3 eeer nterest e sares o rn ed ere transerred a a ddend o sares to

rn 5, arados Enterrses l and rn Atlant nternatonal te Group’s sareolders, rn Gro Holdns Lted elta Arlnes nororated Lted eae nel nororated ssdares o te Gro rn Group op Atlant nternatonal Lted s a oned ssdar, lst arados or r or r or r or r Enterrses l s a seal rose ele set to altate te eternal r r r r atal rasn attes o te Gro n aordane t S , te Gro s eosed, or as rts, to arale retrns ro ts noleent and as ret te alt to aet tose retrns tro ts oer oer arados urss ro pr Enterrses l e reslts o arados Enterrses l ae een urss ro sso onsoldated nto te reslts o te Gro ete rties er coo cotro e roorton o otn rts eld te Gro n ea o ts ssdares s o r prs s te sae as te roorton o ordnar sares eld All ssdares ae urss ro r prs een nlded n te onsoldaton All enttes n te onsoldaton ae te ous o r prs sae aontn reerene date ous o o r prs

siiries All ssdares oter tan rn Atlant o Lted are ndretl eld e ous o o susrs roorton o otn rts eld te Gro n ea o ts ssdares s te sae as te roorton o ordnar ssed sares eld All ssdares ae een nlded n te onsoldaton All enttes nlded n te onsoldaton ae te sae aontn reerene date

Ar era eeloent Lted as elded ro te onsoldaton t eet ro Seteer on te ronds tat te Coan eerened seere restrtons n ts alt to enore te rts tat ad reosl alloed te Coan to eerse donant nlene oer te oeratonal and nanal oles o Ar era eeloent Lted ese restrtons ae ontned to reent te Coan ro eersn eter donant or snant nlene oer Ar era eeloent Lted

110 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 111

Financial statements continued Financial statements continued

112 113

Notes forming part of the

financialos or statements pr o

ss continued continued

ete rt trsctios continued tite oi u ro r prs prr rs o r ss ss In March 2019, a £30.0m facility was made available by the Group’s The irectors consider that the Group’s ultimate and immediate arent Company and its controlling party is Virgin Group oldings Limited, a company incorporated in the srors r s o o s r o ru r s urss ro r prs rprs oos ritish Virgin Islands, the accounts of which are neither consolidated nor publicly available. The irectors consider that Sir ichard ranson is the ultimate controlling party of srs purs or us usss o o rsos ss o s s u r o the Company. are on an arm’s lengt ss Group so ru o s o o r s o r ss rsp o s pr o u o s o s o o pr r o o r rsu p oruo ro or s rr o s u so us oitets o ss o r pr r o s s o o pr o prr srs As at 31 ecember 2020, the Group and Company had the following annual commitments under noncancellable leases, which are outside the scope of IS 1 rsos r rs’ o oo s r o o rsu p r s ur u s r oruo or s o prr srs ro por rs ro ur Group r o - or ous o o rs r o o opro Group o rr r s s or os p 2020 2019 - or ous o o r ss r o ros Land and Aircraft Land and Aircraft buildings and other buildings and other ur Group r o o rr r urr or s o £m £m £m £m s r r pros or sr o rus - Commitments under noncancellable leases oss s s o r ss oor pr pr r ss o ot later than one year 2. 0. Later than one year and not later than five years 2. ru or p su or Group rp ur s o s ros r u .9 0. oor s with respect to the parties’ operations on joint r o r u rsu p

rr rous s o rr or Group r oruo o rus u ro pr o rsporo or it coitets Group rps o rr prous s ur r rs ited’s parent company, Virgin Travel 2020 2019 Group r s s rsu o r prous o Group Limited, with partners Stobart Aviation and Cyrus Capital (‘the Consortium’) £m £m rr Group s o o or pro ss spr o rs s r u r poro orsp o rsp rur o rs Capital commitments at the balance sheet date for which no provision has been made 3,33.1 r o – s or o prr srs ur ur op r o ous o or pros or r o r ru r ro s opr oss o r rous opr rsu Capital commitments relating to aircraft and engine purchases are stated at escalated list price less progress payments. r Group o r s s o o r prs rsp o o rr r oss urr spr o s o oprs o Group so o It is intended that these purchases will be financed partly through cash flow and partly through eternal financing and leasing arrangements. ro o o rr r prs or opr up o sur o r or sss o Group or oss o ss o r s ur r ou ru rs ur s o rs ou o ur r o o purss r prs o rsos ouded at arm’s us r s ou o ous ps u ous o ur o

rr r r or sro s Group ps o ror r ous o o ro sror ou o su rors r oo ur o ur u

at the balance sheet date, and therefore do not meet the ‘virtually certain’ roo rr pr or Group pr u u o os r o rr o o

112 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 113

Financial statements continued Financial statements continued

114 115

Notesos or forming pr part o of the financial ss statements continued

ici istrets ii ir es o ici ssets iiities The Group’s financial risk management policies are established to identify and i ici istrets cteor r us o Group’s srus r sos rr s rss Group o s ppropr s oros o Group s p o ur o pus us r r oor rss r o s us s oos or pros r prps or or rs s s ici ssets r pos or sp rs su s or rs rs r s s uo prs uus rs or rs r rs us o r srus s o ss sr s sss or s u

r u rou pro oss rsur uo o Group ps rs r srus pus or uo prs u r pos ur or ppro or ors os rs ors os osr or ss or r r or r s o ss The Group’s Treasury function also identifies, evaluates and hedges financial risks r or rs prps ru o pus or ss or r o s o osr pp ours ss rs o r rs pos Group os o spu r ici iiities srus r us s s o ur ps posurs o r u rou pro oss o srus rr r u Group r r usss r srus srus oss o u or rs r i e rice ris s ors os sp rs s r s o r u rr Group s pos o u pr rs Group’s u po s o orros u s s sou s o s uo u us o rr r u pro usss ro s rr rs o r or ps uur s os r s s o orr rs orr u pr po os Group o s up o os u pr rs ro osr rs o rpor pro ou prs p sr u or orr rs sou r rs r rs o rous po os or us o ur o rs o or ourprs our rs ppro ourprs ppro s or or srus r o sur r u o

rurr ss rors osr rr ous o oo osrs ss o srus o sss s s sos o ppro r r rso poss u prs or rs os us o pro or u

r r o rsrs s ur r

ici ris eet Group s pos o r o rss u r rs u or urr rs rs r rs u pr rs r rs p rs u rs

or rs prosss ous o posurs rs ro upr rs o p the Group’s rs pp o s po rs s o pror

114 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 115 Financial statements continued Financial statements continued

116 117

otes forming part of the Notes forming part of the financial statements financial statements continued continued

i e rice ris continued oo osrs ss o srus o rso poss or rs or rs os o pro oss or u

Group

Group m m ncrease in fuel price by a fied percentage ncrease

in profit before ta r o G urr r pr ecrease in fuel price by a fied percentage rs pro or ecrease in profit before ta urr r pr

rs pro or

ii orei crrec ris The Group is primarily eposed to fluctuations in the dollar hich can currency, amount and timing of their respective cash flos The Group assesses significantly impact financial results and liuidity The Group has substantial hether the ircraft ease designated in each hedging relationship is epected iii terest rte ris i reit ris rs r s o rs rss o o r orros s liabilities denominated in dollars, due to ngineering aintenance rovisions to be and has been effective in offsetting changes in cash flos of the hedged Group s pos o r rs o o opror s ss rs r rs po o s o or and ircraft eases significant proportion of these are matched ith dollar item using the hypothetical derivative method n these hedge relationships, ourprs rsp o sss r s o r os o p r op r o o cash the main sources of ineffectiveness are poss r srus r srus s o orpos op o rs r uuos urrency risk is reduced through the matching of receipts and payments in • hanges in the timing of the hedged transactions and r rs s o ru rs o u rs posur r o p s o r posur o individual currencies and holding foreign currency balances to meet future • onalignment beteen the echange rate ruling at the balance sheet rs r posur s o ss r o obligations n addition, the Group designates certain ircraft ease contracts as date and the echange rate ruling at the date the forecast revenue is ourprs s o r rsp r rs r u sps osro ur u o s s sor cash flo hedges recognised r so osr rr r r o rs rs

ny eposure that cannot be naturally hedged, or is not designated in a cash flo The foreign echange hedging policy aims to protect the business from ourpr r u posurs r rur r rr ss r o o rs ss p hedge is managed through application of the foreign echange hedging policy significant near term adverse movement in echange rates The policy allos ous o p ors so o r r s o rs rs r o o the Group to hedge ithin bands up to months out ith declining percentages n implementing the strategy, the foreign echange hedging policy r s o o rs rs o The Group has designated certain dollar ircraft ease payments to hedge allos for the use of a number of derivatives available on the overthecounter eposure in highly probable forecast dollar revenue The transactions are sosur r o r u o r or rs s T markets ith approved counterparties s proporo o or s u r o considered highly probably based on past performance revenues received or s in prior years, forecast cash flos and the Group’s business model ie an emphasis on transatlantic flying These are designated as cash flo urrs r G rs rur o or s s hedges, and the hedge ratio applied is The Group determines the o u rs or r o or G eistence of an economic relationship beteen the hedging instrument and hedged item based on the

116 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 117 Financial statements continued Financial statements continued

118

119

Notesos or forming pr part o of the

ss financial statements continued

i iiit ris ecociitio etee oss or te er cs eerte o o Group’s u rs s o sur su oertios

s s o uur s s u sur p ss o os u rous rs

Group Group s proporo o s or o r us s ss o p o usss srupo o Group uss oo o o– ossroit or te er rr s ourprs o u rurs r o rs r s uss or

pro ur pro o s s o usou ross s orso os oru urs ou o G oss o urs or

ro o spos o propr p up sss rooss ro u ou ss o ii it ris Group’s os p r o sur Group’s o proso or s o ou s o or orr rs r u o rs o pro rurs or srors s or or sors o oss op p sruur o ru os o p r po s

or p s Group oors s r ro o s s o os orros ss or uo purposs or o s s us r or rs r or ps rr ru o r r our opros rosos

rs p

o s p ror s us ro opr s uss or or po s s ro opr s or po s

118 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 119

Financial statements continued Financial statements continued

120 121

os or pr o Notes forming part of the

ss financial statements continued continued

ecociitio etee ossroit or te er cs eerte seet eets oertios continued ur op s s o o s o s p o o s ss s

i stets o oter ecetio ites r Group op urr so rpso p or s p oprs

• urr sror u ro r Group ro s o s o • urr suppor ro ror roups u opr s ssors o

sous r

oss

prs

r prs

ro o spos o propr p up

sruur oss

rs osss o or ps

ro s o s o sruur oss r o u ou ss po s

rr oss Goo pr r prs

120 Virgin Atlantic Annual Report 2020 Virgin Atlantic Annual Report 2020 121