Virgin Atlantic has secured a £1.2 billion rescue package over the next 18 months, only from private funds. The package is to keep the airline flying as the aviation industry struggles to pick up from the slump in international travel.
The rescue package includes £200 million from Sir Richard Branson’s Virgin Group, £170 million funding from US hedge fund Davidson Kempner Capital Management, and the postponement of about £450 million in payments to creditors (Virgin Group and Delta Air Lines).
The airline expects to generate a further £280 million under cost savings.
According to Virgin Atlantic, the refinancing will cover the next five years and also paves the way for it to rebuild its balance sheet and return to profitability in 2022.
However, the deal must secure approval from relevant creditors through a process introduced as part of Government reforms to corporate restructurings.
In April, Virgin Australia entered into voluntary administration so as to recapitalize the business amid the global COVID-19 pandemic. The air carrier failed to secure $1.4 billion funding from the Australian government. It was later sold to US investment firm Bain Capital, though the deal has proved controversial, with bondholders left £3.8 billion out of pocket.
In May, Virgin Atlantic cut 3,150 jobs owing to the COVID-19 pandemic. The move was aimed at cutting costs and preserving cash.
The airline is set to restart flights on 20th July 2020 to destinations including Hong Kong, Los Angeles and New York.