Branson stumps up £200m to secure a £1.2billion rescue package for Virgin Atlantic
Virgin Atlantic has secured a £1.2billion rescue package in a boost for Britain’s beleaguered aviation industry.
The airline was at risk of plunging into administration after the global travel shutdown forced it to abandon commercial flights.
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It was feared any collapse would lead to almost 10,000 job losses, and thousands more at airports.
Rescue package: Sir Richard Branson’s Virgin Atlantic was at risk of plunging into administration after the global travel shutdown forced it to abandon commercial flights
The rescue, through private funding, is a vindication of the Government’s decision to resist a plea by Richard Branson for £500million in taxpayer support.
The multi-billionaire, who does not pay personal tax in the UK, had been accused of trying to ‘fleece’ taxpayers by Michael O’Leary, the boss of rival airline Ryanair, by applying for an emergency coronavirus loan from the Treasury.
The bid was rejected by ministers who said the airline had not done enough to explore other ways of raising money.
At the height of the crisis, Branson even promised to put his private Caribbean island of Necker up as collateral for any loan, although it is not clear if the £80million paradise was a condition of the deal announced yesterday.
The new rescue package is worth £1.2billion over the next 18 months and is in addition to measures already taken, such as cost savings of around £280million per year and changes to aircraft orders over the next five years.
It includes £200million from Branson’s Virgin Group and a £170million loan from Wall Street hedge fund Davidson Kempner.
Shareholders Delta Air Lines and Virgin Group have agreed to defer £400million of fees. Other creditors are expected to defer payments worth £450million.
Branson has also sold his £400million stake in Virgin Galactic, his space exploration business.
Virgin Atlantic will focus on leisure routes to the Caribbean and Israel, while the US remains off-limits.
It will operate a down-sized fleet of fuel-efficient jets with services restarting next Monday, focusing on flights from Heathrow and Manchester.
Gatwick airport, Virgin Atlantic’s base of 36 years, has been abandoned and the airline will be scrapping at least 11 aircraft, including its entire fleet of gas-guzzling jumbo jets.
Some 3,150 jobs – about a third of the workforce – are being cut, although the airline does not expect to make any more redundancies due to the rescue package.
It is hoped the drastic downsizing will allow Virgin Atlantic to return to profit in 2022 after years of losses.
Virgin Atlantic chief executive 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.
‘We greatly appreciate the support of our shareholders, creditors and new private investors and together, we will ensure that Virgin Atlantic can emerge a sustainably profitable airline, with a healthy balance sheet.’