(TAN): Virgin Atlantic has announced plans for a private-only solvent recapitalisation of the airline, following the severe impact of the COVID-19 pandemic on the global economy, and especially the aviation industry.
The airline has begun 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.
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.
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The recapitalisation will deliver a refinancing package worth GBP 1.2 billion (USD 1.5 billion) over the next 18 months in addition to the self-help measures already taken, including cost savings of GBP 280 million yearly and GBP 880 million rephasing and financing of aircraft deliveries over the next five years.
Shareholders are providing GBP 600 million in support over the life of the plan, including a GBP 200 million investment from Virgin Group, and the deferral of GBP 400 million of shareholder deferrals and waivers. Creditors will support the airline with over GBP 450m of deferrals.
The restructuring plan and recapitalisation are expected to come into effect late Summer 2020.
Situation now
Having closed its London Gatwick base, while retaining a slot portfolio at the airport to protect opportunities for future growth, leisure flying is now consolidated at London Heathrow and Manchester. 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 fleet of 37 twin engine aircraft following the retirement of seven 747s and four A332s by Q1 2022, with rescheduled delivery of outstanding A350s and A339s.
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Returning to the skies
From July 20, Virgin Atlantic will restart passenger flying and has a vital role to play in supporting the UK economy as it recovers from the impact of the pandemic. While demand will be slow to recover, Virgin Atlantic will ensure its customers always feel confident to fly by continuing to prioritise the health, safety and security of its people and customers throughout their journey. Sustainability remains central to the airline, and its simplified fleet will be 10% more efficient than it was pre-crisis.
Virgin Atlantic CEO Shai Weiss said, “Few could have predicted the scale of the COVID-19 crisis we have witnessed and undoubtedly, the last six months have been the toughest we have faced in our 36-year history. We have taken painful measures, but we have accomplished what many thought impossible. 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.”
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“Once our plan is approved, we will continue to focus on providing our customers with the service they have come to expect. Despite the incredible efforts of our teams, through cancelled flights and delayed refunds we have not lived up to the high standards we set ourselves, but we will do everything in our power to earn back their trust,” Weiss said.
