Virgin Atlantic set to unveil £1bn rescue package
Virgin Atlantic will this week unveil a £1 billion rescue deal, ending months of uncertainty over the future of Sir Richard Branson’s airline.
Shai Weiss, the chief executive, has drawn up a four-year plan that will allow the carrier to survive even if flights to the US do not return until 2021.
With many US states retrenching into lockdown after a spike in Covid-19 cases, and a presidential election later this year, Sir Richard’s 36-year-old airline has been forced to plan for the worst.
Virgin Atlantic will kick off a phased return to the sky in the coming weeks, initially focusing on services to the Caribbean and Israel.
Details of the rescue package could be announced as early as Tuesday, with the deal rubber-stamped by creditors shortly afterwards.
Davidson Kempner, the Wall Street hedge fund, will provide loans of up to £200m. That cash injection will be matched by Sir Richard, who raised $500m (£396m) by selling a stake in space venture Virgin Galactic in May.
A further £400m will come from the deferral of fees owed to the Virgin Group and the airline’s minority shareholder Delta over the next three to five years. Credit card firms and aircraft leasing companies will agree to defer payment of £200m.
Insiders said the raising of third-party funding, together with Sir Richard’s cash injection, had been pivotal in convincing other creditors to back the airline’s rescue.
The Government rejected a request from Virgin Atlantic for bespoke support at the height of the pandemic. A rescue deal would be a major coup for Sir Richard. Ministers told him to explore private options instead of tapping the UK taxpayer for support.
Rival airlines such as British Airways, easyJet and Ryanair have raised hundreds of millions of pounds in state-backed loans from the Treasury’s Covid Corporate Financing Facility.
Overseas governments have gone one step further, taking equity stakes in their flag carriers. Lufthansa agreed an £8bn rescue with the German government and Air France secured a £6bn bailout from Paris.
Under Mr Weiss’s plans, 3,150 Virgin Atlantic jobs will need to be cut. The airline will also retire older planes in favour of more fuel-efficient aircraft, and has signalled it will cease operating out of Gatwick airport.
