LONDON – Sir Richard Branson’s Virgin Atlantic (VS) is close to unveiling a £1.2bn rescue package that will save thousands of British aviation jobs.
As part of the refinancing of the British-based carrier, Sir Richard Branson’s Virgin Group will inject £200m in cash, while Davidson Kempner, a hedge fund, will lend the company £170m.
Private Financial Rescue
Virgin Group was in talks to obtain a £200m private financial rescue from First Data, a subsidiary of Nasdaq-listed Fiserv, which had made onerous demands relating to cash collateral, is understood to have been secured in the last few hours, enabling the deal to go ahead.
Delta Air Lines (DL), VS’s with other shareholders, will collectively defer approximately £400m of fees, with hundreds of millions of pounds more secured in the form of deferrals and advances from payments companies and aircraft lessors.
£1.2bn in 18 Months to Save The airline
The package is said to be worth up to £1.2bn spread over 18 months, with a further £200m or more expected to be generated by cost savings under a plan drawn up by Shai Weiss, the airline’s chief executive.
If concluded, the deal would remove the risk of VS collapsing into administration in the medium term.
Branson, who launched Virgin Atlantic in 1984, will retain a controlling stake in the business following the restructuring, which will vindicate the government’s decision to resist Sir Richard’s plea for financial support from the taxpayer.
Virgin Atlantic Restructuring Plan
Virgin Atlantic recently announced a restructuring of its operations designed to save hundreds of millions of pounds annually.
It is cutting 3,150 jobs – almost a third of its workforce – and ceasing flights from London’s Gatwick Airport (LGW), concentrating future UK flights at London Heathrow (LHR) and Manchester Airport (MAN).
Since the coronavirus outbreak, the company has furloughed thousands of staff and seen its top executives agree substantial pay cuts.
As we have seen lately, British airlines including VS have been pressing the government to introduce measures that would revive passenger demand for flights between the UK and the US.
Virgin Atlantic Plans for Returning to The Skies
According to a media press release from VS, from 20 July Virgin Atlantic will restart passenger flying and has a vital role to play in supporting the UK economy as it recovers from the impact of the pandemic. Virgin Atlantic and Virgin Atlantic Holidays will continue to support global supply chains and flying customers safely to the places they love to travel.
While demand will be slow to recover, VS will ensure its customers will always feel confident to fly by continuing to prioritize the health, safety, and security of its people and customers throughout their journey. Sustainability remains central to the airline, and its simplified fleet will be 10% more efficient than it was pre-crisis.
Comments from Virgin Atlantic CEO Shai Weiss
In today’s media press release, VS CEO stated, “Few could have predicted the scale of the COVID-19 crisis we have witnessed and undoubtedly, the last six months have been the toughest we have faced in our 36-year history. We have taken painful measures, but we have accomplished what many thought impossible.”
“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.”
“Once our plan is approved, we will continue to focus on providing our customers with the service they have come to expect. Despite the incredible efforts of our teams, through cancelled flights and delayed refunds we have not lived up to the high standards we set ourselves, but we will do everything in our power to earn back their trust.
“While we must not underestimate the challenges ahead and the need to continuously respond to this crisis, I know that now, more than ever before, our people are what sets us apart. I have been humbled by their support and unwavering solidarity throughout. The pursuit of our vision continues and that is down to each one of them.”