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Richard Branson’s Virgin Group, Delta Air Lines Leads Virgin Atlantic Bailout

Richard Branson’s Virgin Group, Delta Air Lines Leads Virgin Atlantic Bailout
Joe Cortez

Troubled airline Virgin Atlantic will continue to fly, thanks to a generous bailout package raised from private funders and deferred payments. Virgin founder Richard Branson, Delta Air Lines and others are working together to keep the carrier afloat.

Despite financial troubles from COVID-19, Virgin Atlantic will continue operations through a private bailout plan. In a press release, the airline announced $1.51 billion solvent restructuring bailout plan, led by Richard Branson’s Virgin Group and majority stakeholder Delta Air Lines.

Bailout Includes New Investments and Debt Deferrals

Under the terms of the plan, shareholders including Delta Air Lines and Virgin Group will provide approximately $829 million in support. Around $251 million will come from a direct investment from Branson’s company, while Delta and other companies will provide just over $500 million in deferrals. Hedge fund Davidson Kempner Capital Management will also invest in the carrier, providing secured financing of around $214 million.

Airline creditors will agree to support the carrier by providing nearly $566 million in debt deferrals. In addition, credit card merchant service providers Lloyd’s Cardnet and First Data will continue to do business with the airline.

If the restructuring plan is approved by British courts, the airline expects everything to be in place by the end of Summer 2020. From there, the restructuring plan will put in motion a five-year business plan, with the airline expecting to be profitable again by 2022.

“Once our plan is approved, we will continue to focus on providing our customers with the service they have come to expect,” Shai Weiss, chief executive officer of Virgin Atlantic said in the press release. “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.”

Bailout Negotiated Through Private Funds

The unique point of the plan comes from securing an the 18-month refinancing package through private funding. Although the airline accepted government assistance through the U.K. Coronavirus Job Retention Scheme, the new bailout is funded from private sector companies.

To get back to profitability, the airline has scaled back operations significantly. In addition to wage cuts, closing their base at London Gatwick Airport (LGW) and laying off 3,550 employees, the airline will retire 11 aircraft: seven Boeing 747s and four Airbus A330-200 airframes by the first quarter of 2022. At the end of restructuring, the airline will only operate 37 twin-engine aircraft, but plans to operate the same number of sectors as 2019.

The airline will also push back their delivery of Airbus A350 and A330-900neo aircraft. As of June 17, 2019, the airline held orders for 14 Airbus A330-900neo and 12 A350-1000 aircraft.

Feature image courtesy: Virgin Atlantic

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1 Comment

  1. jficht

    July 15, 2020 at 9:01 am

    On a United flight from IAH to DTW on Monday, July 13th I again nursed two G & T’s plus a cup of coffee and snacks for about two hours of the 2 1/2 hour flight and had no mask on for that time. I observed that the rest of the passengers in first class only had their masks on for about 1/2 of the time. Also the couple across the aisle from ne brought their own dinner. I wonder what would happen if the airlines would say no food or drinks at all? I don’t think that would go over very well.

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