Virgin Atlantic secures rescue deal, but will it survive?
Virgin Atlantic deal has secured a rescue deal worth £1.2 billion, having been refused a government bailout.
Much of the funding will come from its existing shareholders – the Virgin Group and Delta Air Lines – and from a new investor, hedge fund Davidson Kempner Capital Management.
Virgin Group, the biggest shareholder, will pump in a further £200 million, while Davidson Kempner will lend the airline £170 million.
Both Virgin Group and fellow shareholder Delta will defer payment of £400 million of loans to the airline.
Other creditors are expected to defer payments of a further £450 million.
Virgin Atlantic said the deal will pave the way for the airline to return to profitability in 2022.
But will it?
The plan still needs to be sanctioned by Virgin’s creditors under a court-sanctioned process.
While they are expected to give the go-ahead and ensure Virgin’s medium term survival, the airline doesn’t have a lot of new cash to play with.
Much of the £1.2 billion package is in the form of deferred loans, with only £370m of fresh funding.
This will allow Virgin to stave-off bankruptcy in the short term, but its long-term survival is not yet guaranteed.
That said, the airline has taken drastic measures to reduce its overheads, including shedding 3,500 jobs and closing its Gatwick base.
It will relaunch flights on 20 July as a much slimmer airline, but, like its competitors, it has a long battle ahead.
By Linsey McNeill, Editor (UK)
Linsey McNeill
Editor Linsey McNeill has been writing about travel for more than three decades. Bylines include The Times, Telegraph, Observer, Guardian and Which? plus the South China Morning Post. She also shares insider tips on thetraveljournalist.co.uk
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