Good news: Virgin Atlantic unveils £1.2 billion rescue plan, avoids pandemic-induced bankruptcy
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On Tuesday, Virgin Atlantic announced that the airline has achieved majority backing for an agreement that will safeguard its flying into a post-COVID-19 future.
The life-saving package comes months of doubt and financial turmoil which resulted in the airline’s founder, Sir Richard Branson in April this year, asking the U.K. government for a bailout, which was rejected. Now, three months later, Virgin is in the final stages of confirming a two-part court-backed process which will, for now, prevent the airline from going under. The deal comprises solvent recapitalisation of the airline and holiday business, and a company-wide Restructuring Plan.
The deal was able to go ahead through private backing from First Data, a Nasdaq-listed Fiserv, reports Sky News, which was the final step to securing the airline’s safety during the current turbulent times for the aviation industry. As approval has been received from the majority relevant stakeholders, Virgin Atlantic details that the two-part Restructuring Plan and recapitalisation will begin towards the end of summer 2020.
Within the proposed 5-year business plan is significant financial support from shareholders, Virgin Group and Delta Airlines, as well as new investors and existing creditors.
In total, the bail-out package is worth around £1.2bn, which the airline will receive over the next 18 months. A large chunk of the money will come from investments — £200m from Virgin Group itself, as well as a deferral of a further c.£400m Virgin Group and Delta deferrals and waivers. A further £450m of deferrals will be made possible through the support of creditors.
The airline has also formed a new partnership with Davidson Kempner, a global hedge fund who will be loaning the company a secured sum of another £170m.
More financial respite will come in the form of the reorganisation of the delivery and financing of aircraft over next five years — saving c.£880m — as well as other cost-saving measures that the airline has already put in place with an estimated value of £280m per year.
Since the ramping up of the coronavirus pandemic in mid-March, the airline has taken several steps to reduce costs including temporarily stopping all commercial operations in April. As the crisis further took hold of the industry, Virgin announced further drastic measures including that it would be retiring it’s beloved fleet of 747s, close its Gatwick base and making 3,000 jobs redundant to keep the airline flying.
Shai Weiss, Virgin Atlantic CEO, said in a statement: “The solvent recapitalisation of Virgin Atlantic will ensure that we can continue to provide vital connectivity and competition to consumers and businesses in Britain and beyond. We greatly appreciate the support of our shareholders, creditors and new private investors and together, we will ensure that Virgin Atlantic can emerge a sustainably profitable airline, with a healthy balance sheet.”
As airlines around the world are starting to take to the skies once more, Virgin, too, has detailed its plan to regrow its route network and start flying passengers once again. Initially, passengers can expect a slightly different onboard experience, including the mandatory wearing of masks inflight, as well as the absence of alcohol drinks onboard. The airline hopes to return to profitability in 2022 and for now, your Flying Club miles should be safe.
Featured image by Loop Images/Universal Images Group via Getty Images
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