The transatlantic airline’s GC talks to The In-House Lawyer about what it takes to advise one of the world’s most high-profile carriers amid a global pandemic.
The In-House Lawyer (IHL): What was your career path into your current role with Virgin Atlantic?
Julian Homerstone (JH): I attended Guildford college of law and trained and qualified in the City with DLA Piper, staying there for four years post-qualification as a member of its aviation team, where I was fortunate enough to be put on separate secondments with Virgin Atlantic and low-cost carrier GoFly. It was during this time that I caught the in-house bug, and was later headhunted by Virgin Atlantic to join their in-house team. After accepting, I became head of legal in 2007 and then Virgin Atlantic Group general counsel in 2014.
IHL: What is it about the aviation sector that you enjoy so much?
JH: The breadth of work. It’s multi-jurisdictional – you have asset finance, regulatory work, company commercial work and a multitude of other areas combined in one industry. The heavy – and entirely justified – compliance burden which ensures that safety is the number one priority at airlines also means there is a huge focus on legal obligations. This gives lawyers a strong and deserved influence in the organisation, which is another bonus.
IHL: What has kept you at Virgin Atlantic when many legal counsel move companies fairly regularly?
JH: When deciding whether to stick in a role or twist, most people look for similar things. You want to be stretched; to be able to push the boundaries; to make a winning difference for a company or enterprise that you are proud of; you want to be supported; and you want the opportunity to contribute. You also want to believe in the mission and purpose of the organisation and for its culture to align with your own beliefs. On the softer side, you also want close colleagues and friends that you are able to have fun with. Virgin Atlantic has always had all of these positive aspects and more.
I am extremely proud to think of what we’ve achieved in the last 16 years. Not only have we taken on new aircraft, new routes and new partnerships, we’ve weathered threats such as the global financial crisis, the 2010 volcanic eruption and 9/11, and now we are in the process of resisting the effects of the pandemic. We’ve launched new products, too; the concept of premium economy and flat beds started with us. Finally, in September of last year we became the first company to complete a consensual solvent recapitalisation under Part 26a of the Companies Act 2006. We genuinely push the boundaries, and the company and my own ambitions have stayed in alignment as my career has moved forward.
IHL: The airline industry is one which appears to have been particularly negatively affected by anti-Covid measures. What were some of the first things you did to safeguard the business?
JH: There is no doubt that the aviation sector has been sorely tested and that 2020 was a year like no other. However, we did manage to safeguard the company, and we did this, first and foremost, by recognising the magnitude of the challenge at an early stage.
We then followed a strategic solution that was both simple and well designed to deliver three things: speed, certainty and simplicity. Step one was to retain top-notch external advisory teams covering legal, financial and banking expertise to support management and the in-house legal function while immediately launching decisive self-help remedies at the same time. The senior management team led from the front with pay cuts, and then the vast majority of the company followed by taking eight weeks of unpaid leave which was later replaced by furlough. Our cargo team, which pre-Covid was already a major player in the pharma and medical transportation sector, spooled up, and during 2020 operated more than 4,000 cargo-only flights that brought in many thousands of tons of PPE and test kits, generating revenue in the process.
The next step was to look across the organisation to see where we could strip out costs and streamline the organisation – we tried to look at the company as if it were a start-up. Some of the more major cuts include closing our base at Gatwick, retiring our Boeing 747 and Airbus A340-600 aircraft, and consolidating our operations to Heathrow and Manchester. We also saw a significant drop in headcount by about 50%. This occurred for a variety of reasons, including employees leaving voluntarily, natural attrition and redundancies, and was one element of the general objective of overall success going forward. Finally, retaining a strong management team meant we were capable of devising a restructuring plan, culminating in the £1.2bn we raised in our solvent recapitalisation under the 26a process. All of this happened only because we were supported by our stakeholders, who took the hit alongside all of us – staff, shareholders, creditors, lessors and our banks.
IHL: The company also applied for Chapter 15 proceedings in the US, could you talk about that as well?
JH: During the restructure, we did have an associated Chapter 15 filing in the United States, but the primary restructure was under the UK’s 26a process. Our Chapter 15 filing helped ensure that our UK solvent restructuring process was recognised in the US. It should be noted that this was not a Chapter 11 bankruptcy process. Under the new 26a process, which supersedes the previous system of schemes of arrangement, the hurdles to get through a restructuring plan have been amended as classes of creditors can be compelled to accept a restructuring plan if, and only if, the restructuring plan is demonstrably better for each creditor than the alternative. While in our case this mechanism was not needed, as we successfully reached a fully consensual deal, it was useful to have the extra flexibility.
IHL: When operating as usual, airlines have to keep to pre-organised take-off and landing slots. What happens when you have to hit the brakes on this?
JH: Virgin Atlantic is the second-largest slot-holder at Heathrow. The pandemic led to various alleviations being granted to allow all airlines to reduce their volume of passenger operations without being penalised for not following the usual slot-usage rules which, in normal times, look to utilise as much airport capacity as possible.
It is, however, worth pointing out that air transport movements at our key airports have continued and are continuing during the pandemic. Cargo operations are continuing to operate in support of the national effort to bring in supplies to the UK, so our take-off and landing slots continue to be used in part. As an example, we are currently deploying all of our Boeing 787 and Airbus A350 aircraft – our most modern types – to operate services. The balance is more skewed towards cargo flights at this stage as there is an insatiable demand for essential goods to come into the UK – everything from PPE to testing kits. We also expect there will be a large demand for us to assist with shipping the vaccine out around the world over the next few months. We as an airline have an absolutely key part to play in supporting the effort to save lives both nationally and internationally, and this is something we are particularly proud of.
IHL: You recently took on company secretarial duties on top of your responsibilities as GC. How has it affected your day-to-day role?
JH: I assumed the role of Virgin Atlantic group company secretary in September 2020 and this means that I now attend all board meetings as an officer of the company. It has also streamlined various governance processes. It ensures, for instance, that the board has access to the general counsel in real time, which – especially useful during a time of volatility – promotes agility, dynamism and quick decision making.
Being company secretary hasn’t changed my day-to-day role too much. I still enjoy the support of a brilliant team around me to help the business to avoid silly mistakes and ensure we do business in the right way. Note that I say I help us to avoid silly mistakes, not all mistakes; when you have a dynamic organisation, speed of delivery is very important, and you need to promote organisational confidence, so making the business feel frightened or defensive is a no-go. If I had to boil down what defines a top-level general counsel, I would say that this is someone who is able to influence the organisation’s culture and confidence in order to make it successful. My new position as company secretary allows me to continue to do this at a board level in addition to a senior management level.
IHL: How involved does your legal team get in the extremely complex operations of the airline?
JH: From a compliance perspective, airlines are arguably one of the most regulated commercial enterprises, and rightly so. In terms of our support of that mission – that safety always remains the number one priority – it is worth pointing out that the compliance culture at the airline is a multi-disciplinary effort across several specialisms, with legal being just one part of that system. Compliance and safety are promoted across the organisation, and in order to support this we have regulatory specialists, safety specialists, engineering specialists and so forth all contributing. Legal is one part of a system underpinned by a compliance and safety-based culture, rather than leading or being the overall arbiter of safety.
IHL: What does a typical day entail for you?
JH: There isn’t really a typical day. Facilitating commercial endeavours at a pace means that I am constantly overseeing whatever is keeping the board and senior management awake at night, and whether we are doing business the right way. In many ways this means a very dynamic environment in terms of thinking laterally prevails rather than there being a steady working day. Talking to colleagues and dispensing guidance while raising organisational confidence and responding to issues that come up is the main constant, but how this is achieved can take many forms.
IHL: How do you maintain team cohesion now that you are less able to meet face-to-face?
JH: There is no doubt that working remotely has created challenges, and most would agree that the camaraderie and support of meeting face-to-face is something which is sorely missed in this pandemic. From my perspective, it is really important for team cohesion to honestly recognise the challenges that people are facing – both professional and personal. There needs to be a recognition of fatigue, especially for people looking after children while also working, which should not be brushed under the carpet. My tip here is that it is vital that people are honest with each other in these exceptional times and let it be known if they are struggling.
It is extremely important to have regular team meetings via video calls, and one thing we are doing much more of is regular one-to-one calls, not to give a to-do list but to have a discussion on a personal basis just to find out how they are and listen to any concerns. We always find time within the team for ad hoc sessions, and I make myself as approachable as possible as well. An injection of humour and cheerfulness is absolutely key, too. It’s important that people feel part of something bigger and that they feel supported.
IHL: Have you seen a noticeable impact from Brexit yet, and do you expect further disruption in the future?
JH: For us, there hasn’t really been a significant adverse impact as, unlike other carriers, Virgin Atlantic does not operate direct short-haul services into the EU. Our long-haul services, for instance to the US, India, Pakistan, Africa, or the Caribbean, are unaffected by Brexit dynamics.
We are also pleased to see that a deal has been done that means that passengers starting in the EU who seek to connect to a Virgin Atlantic long-haul service can have friction-free travel to achieve this. The disruption at the ports relating to road haulage related to Brexit meant we had an opportunity to pick up some of the slack by hauling cargo ourselves. Because of this, we are now operating wide-body airliners [large aircraft with two passenger aisles and seven or more seats abreast] direct between Heathrow and destinations in the EU. The situation will probably stabilise in time, but in the interim this is a positive effect of Brexit for us. Previously, while we did transport cargo as belly hold cargo along with passengers, we did not do cargo-only flights. That’s changed during the pandemic and we now operate cargo-only services which use both belly hold capacity and the passenger cabin to maximise our cargo lift, and, interestingly enough, our new Airbus 350 and Boeing 787 aircraft are able to carry more cargo than our older Boeing 747s which were retired last year, so we’re well placed to operate in this manner.
That Virgin Atlantic has been so effective in adapting ties in with our overall culture; we were the original market disruptor in the airline sector and still have a strong entrepreneurial spirit running through our DNA.
IHL: Are you seeing large numbers of bookings for a few months’ time, when people are hoping they may have more freedom to travel?
JH: Yes. We’ve seen growing demand for travel in the summer from a leisure perspective and a desire from people, given the challenges of the last few months, to get away if it is safe to do so. On the other hand, it seems the pandemic is likely to change how people see business travel. Another area we have seen real growth in is in the area of visiting friends and relatives. There is a blossoming demand for travellers looking to re-establish connections with people they care about abroad, given the restricted international access we have all had over the course of the pandemic.
IHL: What advice would you give to lawyers who are now beginning their careers?
JH: With the diversity of law and different practice areas, giving one-size-fits-all career advice is difficult, but there are some general guiding principles I would encourage any young lawyer to adopt. Work hard, play hard. Maintain a sense of humour and a sense of fun. Be confident, do not play too defensively and do not be afraid to make mistakes, as this is how you learn. Constructively challenge and be aware your voice counts, however junior you are.
Know your client; when you are undertaking work, you need to know what is being asked, why it is being asked and what your client is going to do with your output. If you are providing guidance for someone who is going to give a two-minute update at an executive meeting, for example, there is no point producing a ten-page advice note. Be part of a team; high-performing teams want energisers, contributors, supporters and doers. Overall, align your career with an enterprise that shares similar beliefs and values to that of your own. If you keep these key facets in mind you will have a very fulfilling career.