Creditors back £1.2bn virus rescue for Virgin Atlantic

Virus-hit airline Virgin Atlantic, part-owned by British tycoon Richard Branson, said Tuesday that creditors had approved a £1.2-billion private recapitalisation to help ensure its survival.

The rescue, worth $1.6 billion or 1.3 billion euros, was launched last month following a dramatic jobs-slashing plan, as the coronavirus pandemic hit travel demand and grounded most passenger jets worldwide.

Creditor approval was “a significant milestone in safeguarding its future,” Virgin Atlantic said in a statement, highlighting “overwhelming support of all four creditor classes, including 99-percent support from trade creditors”.

Virgin Atlantic is undergoing a court-sanctioned process under British law to complete its private-only solvent recapitalisation.

The carrier will now face a High Court hearing on September 2 to sanction the restructuring, saying it is confident of getting judges’ blessing.

Across the Atlantic, the plan must make it through a so-called “Chapter 15” hearing—in reference to the US bankruptcy law—on September 3.

‘Milestone’

“Achieving this milestone puts Virgin Atlantic in a position to rebuild its balance sheet, restore customer confidence and welcome passengers back to the skies as soon as they are ready to travel,” the company said.

Branson has previously warned that Virgin Atlantic would collapse unless it received financial aid from the UK government to help weather the crisis.

However, with the state unwilling to help save the 36-year-old airline, Virgin scrambled around for a privately-funded package—which it has secured with the help of Delta Air Lines, which owns 49 percent of the carrier.

The rescue cash, including £200 million from Branson’s Virgin Group, will be delivered over the next 18 months.

The package will pave the way for Virgin Atlantic to rebuild its balance sheet and return to profitability from 2022, according to the carrier.

It also comes alongside the company’s plan to slash annual costs by £280 million per year and the refinancing of new aircraft deals.

Airlines globally have been ravaged by the coronavirus pandemic, resulting in bailouts and thousands of job losses.

Lufthansa has received a nine-billion euro ($10.1 billion) bailout from the German government, saving Europe’s largest airline group from bankruptcy.

Virgin Atlantic, meanwhile, does not foresee a return to pre-crisis levels of flying until 2023.

The carrier announced in May that it would slash its workforce by 3,550 on coronavirus fallout—comprising more than one-third of its staff—and close its base at London Gatwick.

© 2020 AFP