Virgin Atlantic said on Tuesday that it has reached funding agreements worth £1.2 billion ($1.51 billion) from private investors as part of a plan to recapitalize the ailing airline. Calling it “a big step forward in securing its future,” Virgin Atlantic reported the plan covers a five-year period and, in management’s estimation, would return the airline to profitability by 2022. The recapitalization will deliver the refinancing package over the next 18 months and bolster “self-help measures” already taken and expected to result in cost savings of some £280 million per year.
Under the plan, shareholders will provide £600 million in support over its life, including a £200 million investment from Richard Branson’s Virgin Group and £400m of shareholder deferrals and waivers. Separately, Global investment firm Davidson Kempner Capital Management has committed £170m of secured financing, while creditors have agreed to £450 million of payment deferrals.
Virgin Atlantic announced 3,550 employee layoffs in May and closed its London Gatwick base while retaining a slot portfolio at the airport to protect opportunities for future growth. It has since consolidated all leisure flying at London Heathrow and Manchester in the UK. The airline expects it will fly the same number of sectors in 2022 as it did in 2019 despite its smaller scale, “demonstrating productivity and efficiency improvements.” Plans call for the airline to operate a streamlined fleet of 37 twin-engine aircraft following the retirement of seven Boeing 747s and four Airbus A330-200s by the first quarter of 2022. It has also rescheduled the delivery of outstanding orders for A350s and A330-900s.
Virgin Atlantic plans to restart passenger flying on July 20, some four months after its suspension of scheduled flights.
“Global aviation was one of the first industries impacted by the Covid-19 pandemic and will be one of the last to fully recover,” said the airline in a statement. “From the start, the airline took decisive action to ensure its survival. In March, the Leadership Team took voluntary pay cuts and since April, more than 80 percent of the workforce has benefitted from the Government’s Coronavirus Job Retention Scheme, supporting efforts to preserve cash and minimize costs.”
Virgin Atlantic’s flying fell by 98 percent in the second quarter and it expects a reduction in capacity in the second half of 2020 of at least 60 percent compared with the same period in 2019. It added that it anticipates pre-crisis levels of flying to return no earlier than 2023.