MIAMI – Virgin Atlantic (VS) has warned it will “run out of money” by the final week of September if its creditors do not agree on a £1.2bn bailout package today. The deal, which includes proposing creditors accept a 20% reduction in their return from the airline, will be voted on at the High Court in London.
Around 170 other parties whom Virgin CEO, Sir Richard Branson, has loans from will also need to accept staggered re-installments.
Virgin Atlantic Still Enthusiastic
The airline says it “remains confident” that the complex refinancing package will be approved. As well as appealing to creditors to accept less money, VS has shut down its Gatwick (LGW) base and announced it will be forced to terminate 3,150 jobs – one third of its staff.
The Virgin Group, which owns 51%, and shareholder Delta Airlines (DL), comprising 49%, are also injecting £600m to help keep the airline alive. An additional £170m in financing is available from American Hedge Fund, Davidson Kempner Capital Management.
Additionally, VS announced yesterday that it would offer COVID-19 insurance free of charge for customers with existing and new bookings, becoming the second airline after Emirates (EK) to offer such a service.
Virgin Atlantic’s Chapter 15 Filing
Earlier this month, VS filed for protection from creditors in accordance with Chapter 15 of the US Bankruptcy Code in the US, alongside a separate court hearing in the United Kingdom.
Virgin Atlantic insists that support for the restructuring plan was “already secured from the majority of stakeholders.” Though, the company’s lawyers warned the carrier would find itself in a critical cash-flow situation if the deal did not go through.
Virgin Atlantic’s restructuring plans are based on the prediction that the airline will be profitable in 2022. Like all airlines, VS has suffered immensely from the COVID-19 pandemic which forced flights to be grounded worldwide and continues to reduce demand.
Other U.K airlines are also struggling: British Airways (BA) has cut the jobs of more than 6,000 employees through voluntary redundancy and has weakened its £200m Heathrow (LHR) base.
Further, British low-cost airline easyJet (U2) recently announced the closure of its bases at London Stansted, London Southend, and Newcastle airports on September 1. U2 has slashed 30% of jobs.
Featured Image: Virgin Atlantic Airbus A340-600s in storage. Photo: © Daniel Sander.