Virgin Atlantic Mortgages Heathrow Slots in One-of-a-Kind Deal

Virgin Atlantic has raised funds by mortgaging its takeoff and landing slots at Heathrow airport.

Virgin Atlantic has reportedly raised about $328 million for future investments by mortgaging some of its takeoff and landing slots at the U.K.’s Heathrow airport. This is the first time in Europe’s air travel history that airport slots have been leveraged in this way.

“This is an innovative financing arrangement,” Virgin Atlantic CFO Shai Weiss told ATW. “It represents not only a significant milestone for Virgin Atlantic as our maiden capital markets transaction, but is also the first time an airline has successfully accessed the value of its London Heathrow slot portfolio in this way.”

The money Virgin Atlantic raised will be used to make long-term investments and buy new planes.

Prior to this arrangement, the airline set up a subsidiary group called VAIL, or Virgin Atlantic International Limited, which will operate two flights from London to the Caribbean, in order to give lenders some security in case the airline ever ceased operations. With the newly mortgaged airport slots, if the company every shuts down, the slots would be transferred to VAIL and investors would be able to sell them through the subsidiary group. Because Heathrow doesn’t allow investors to own the slots themselves, VAIL is functioning as the property holder.

The deal began the process of finalization back in November. No changes are expected to Virgin Atlantic’s destinations or customer experience as a result of the mortgages, Sky News reported.

The airline is the third largest operating airline out of Heathrow.

[Photo: Bloomberg]