Virgin Atlantic, the airline founded by Sir Richard Branson in 1984, is targeting a privately funded cash injection in the coming days after the option of a state-backed rescue plan seems to have been excluded, Sky News has reported. The package, which is aimed to be worth at least £800 million and likely to surge up to £900 million – City sources said – will not only reinforce the weakened balance sheets amid the Coronavirus crisis, but it will also serve as a symbolic move to bolster confidence in the airline's viability.
A Virgin Atlantic Airbus A330-300. Photo by Karam Sodhi | AeroNewsX
Internal sources are now talking about an “informal deadline” in early July to have the agreement in place. Sky News has also revealed that the amount the carrier contemplates for the refinancing has considerably increased compared to initial estimates given the prolonged damaging effects that the crisis is causing in the aviation industry.
However, the airline, led by CEO Shai Weiss, is still in talks with a number of stakeholders in order to obtain the much needed cash for an airline that is highly dependent on long-haul trips, in the context of short/medium uncertainty over travel demand worldwide. Under the plan, Virgin Group and Delta Air Lines, Virgin’s existing shareholders, would assume around £250 million of new funding to support the company.
A large proportion of the package will therefore help the company defer fees and other payments while ensuring future operations until air travel demand bounces back.
This weekend, two hedge fund proposals to fund up to £250 million in debt are being considered. One is from Davidson Kempner Capital Administration and the other is from Elliot (said to be supported by Monarch Airways’ old owner Greybull Capital). A source close to Virgin’s lenders said one of the mentioned hedge funds is likely to be chosen as primordial partner in the days to come.
The rescue package also comprises several hundred million pounds in support from aircraft lessors and credit card companies, while the Civil Aviation Authority has been asked for flexible requirements regarding VA’s ATOL (Air Travel Organiser's Licence) bonding arrangements.
The prosperity of such a deal would also have a positive effect on the company’s ability to renegotiate credit supply, embracing an “amend-and-extend” settlement.
A Virgin Atlantic Boeing B747-400. Photo by Karam Sodhi | AeroNewsX
Sir Richard Branson has previously raised over £400 million by selling his stake in Virgin Galactic and has pledged his island (worth £81 million) in an unsuccessful bid to guarantee a state-backed bailout.
Meanwhile, Virgin Atlantic has cut its workforce by almost 1/3 – 3,150 jobs in total – as well as its fleet, with the recent announcement regarding the retirement of its 7 Boeing 747s. The airline has also stepped out from Gatwick Airport in order to focus on its two other bases in Heathrow and Manchester Airports, from where is expecting to resume flights to various destinations in the US and China as from July 20.