Virgin Atlantic announces EUR 1.2 billion private-only solvent recapitalisation

July 15, 2020: Virgin Atlantic has announced the plans for a EUR 1.2 billion private-only solvent recapitalisation of the airline, following the severe impact of the Covid-19 pandemic on the company.

“Virgin Atlantic has taken a big step forward in securing its future, by launching a court backed process as part of a solvent recapitalisation of the airline and holiday business, with a restructuring plan that once approved and implemented, will keep Virgin Atlantic flying,” said the release.

In May, the airline reduced the number of people it employs by 3,550 across all functions. From 20 July Virgin Atlantic will restart passenger flying. With the suspension of passenger flying in April, the airline delivered a network of cargo-only flying, operating more than 1400 cargo flights in April, May and June.

Five-year business plan
The restructuring plan is based on a five-year business plan, and with the support of shareholders Virgin Group and Delta, new private investors and existing creditors, it paves the way for the airline to rebuild its balance sheet and return to profitability from 2022.

The recapitalisation will deliver a refinancing package worth EUR 1.2 billion over the next 18 months in addition to the self-help measures already taken, including cost savings of EUR 280 million per year and EUR 880 million rephasing and financing of aircraft deliveries over the next five years.

o Shareholders are providing EUR 600 million in support over the life of The Plan including a EUR 200 million investment from Virgin Group, and the deferral of EUR 400 million of shareholder deferrals and waivers.

o Virgin Atlantic welcomes new partner Davidson Kempner Capital Management LP, a global institutional investment management firm which is providing EUR 170 million of secured financing.

o Creditors will support the airline with over EUR 450 million of deferrals.

o The airline continues to have the support of credit card acquirers (Merchant Service Providers) Lloyd’s Cardnet and First Data.

With support already secured from the majority of stakeholders, it’s expected that the Restructuring Plan and recapitalisation will come into effect late Summer 2020.

Virgin Atlantic’s journey through Covid-19
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 minimise costs. In Q2, flying fell by 98 percent and in the second half of 2020, capacity is expected to reduce by at least 60 percent compared to 2019, with pre-crisis levels of flying unlikely to return until 2023.

“By 2022 Virgin Atlantic will fly the same number of sectors as 2019 despite its smaller scale, demonstrating productivity and efficiency improvements. The airline will operate a streamlined fleet of 37 twin engine aircraft following the retirement of 7 x 747s and 4 x A332s by Q1 2022, with rescheduled delivery of outstanding A350s and A339s,” said the release.

Returning to the skies
Shai Weiss, CEO, Virgin Atlantic, said, “Undoubtedly, the last six months have been the toughest we have faced in our 36-year history. The solvent recapitalisation of Virgin Atlantic will ensure that we can continue to provide vital connectivity and competition to consumers and businesses in Britain and beyond.”

“While we must not underestimate the challenges ahead and the need to continuously respond to this crisis, I know that now, more than ever before, our people are what sets us apart. The pursuit of our vision continues and that is down to each one of them.”