Richard Branson is pumping more money into Virgin Atlantic as part of a £1.2 billion ($1.5 billion) rescue deal to keep the airline solvent just days before it is due to resume passenger flights.
The carrier said in a statement Tuesday that the recapitalization plan will be deployed over the next 18 months and has the support of shareholders, including Delta Air Lines (DAL), new investors and existing creditors.
Under the plan, existing shareholders will contribute £600 million ($750.6 million), including £200 million ($250 million) from Virgin Group, founded by billionaire Branson. US hedge fund Davidson Kempner is providing an additional £150 million ($188 million) in secured financing and creditors have agreed to defer repayments worth £450 million ($562.5 million).
“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,” Virgin Atlantic CEO Shai Weiss said in a statement. “We have taken painful measures, but we have accomplished what many thought impossible,” he added. The company said it expects to be profitable again from 2022.
Virgin Atlantic had previously sought a £500 million ($626 million) commercial loan from the UK government, which was reportedly unsatisfied with the airline’s bid.
Virgin Australia was similarly unable to secure direct financial support from the Australian government, forcing it to enter voluntary administration in April. US private equity firm Bain Capital bought the airline last month, beating out Cyrus Capital Partners, another hedge fund.
Virgin Atlantic, which has only been operating cargo flights since April, plans to restart passenger flights from July 20. The company has laid off 3,550 staff and closed its base at London’s Gatwick airport, consolidating its operations at London Heathrow and Manchester Airport.
Global aviation has been devastated by the coronavirus pandemic, with airline industry losses expected to top $84 billion this year, according to the International Air Transport Association. Air travel is not expected to recover to 2019 levels until at least 2023.
Australia’s Qantas (QABSY) confirmed Tuesday that it would not start flying to international destinations, with the exception of New Zealand, until March 2021.
In preparation for a world in which people fly less, Virgin Atlantic, IAG-owned British Airways, EasyJet (ESYJY) and Ryanair (RYAAY) have already announced more than 20,000 job cuts between them and slashed orders for new aircraft.
That’s hit planemakers and parts suppliers, leading to layoffs at companies such as Airbus (EADSF), Boeing (BA), Rolls-Royce (RYCEF) and Meggitt (MEGGF), and deepening a growing jobs crisis in Britain.
— Michelle Toh contributed to this article.