Virgin Atlantic has today formally announced that they have reached agreement to secure its future with a private-only solvent recapitalisation of the airline, following the severe impact of the Covid-19 pandemic on the global economy and the travel and aviation industry.
The Restructuring Plan is based on a five-year business plan, and with the support of shareholders Virgin Group and Delta, new private investors and existing creditors, it paves the way for the airline to rebuild its balance sheet and return to profitability from 2022.
The recapitalisation will deliver a refinancing package worth c.£1.2bn over the next 18 months in addition to cost savings of c.£280m per year and c.£880m rephasing and financing of aircraft deliveries over the next five years.
- Shareholders are providing c.£600m in support over the life of The Plan including a £200m investment from Virgin Group, and the deferral of c.£400m of shareholder deferrals and waivers
- Virgin Atlantic has a new partner hedge fund Davidson Kempner Capital Management LP, which is providing £170m of secured financing
- Creditors will support the airline with over £450m of deferrals
- The airline continues to have the support of credit card acquirers (Merchant Service Providers) Lloyd’s Cardnet and First Data.
To secure approval from all relevant creditors, the Restructuring Plan will go through a court-sanctioned process under the Companies Act 2006 ). With support already secured from the majority of stakeholders, it’s expected that the Restructuring Plan and recapitalisation will come into effect late Summer 2020.
The future of Virgin Atlantic
Having closed its London Gatwick base, while retaining slots at the airport for future growth, flying is now consolidated at London Heathrow and Manchester. By 2022 Virgin Atlantic will fly the same number of sectors as 2019 despite. The airline will operate a streamlined fleet of 37 twin-engine aircraft following the retirement of 7 x B747s and 4 x A332s by early 2022, with rescheduled delivery of outstanding A350s and A339s. From 20 July Virgin Atlantic will restart passenger flying.
Shai Weiss, CEO, Virgin Atlantic commented: “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.”
While this is good news and has protected a number of jobs, Virgin are far from out of the woods. Sadly its route network is nearly all countries that are currently closed to visitors from the UK except in certain exceptions. Until the US starts to sort out their COVID-19 crisis, I can’t see demand returning for travel to the US. The UK government are also highly unlikely to lift the FCO ban on all but essential travel to the US or the 14 day quarantine any time soon. However, for the time being our miles are safe and hopefully Virgin may even start to refund some cancelled flights!