Virgin Take a Step to Survival
Reported by City A.M. an overwhelming majority of Virgin Atlantic’s creditors have this afternoon approved the embattled airline’s £1.2bn bailout package, a critical step in ensuring the carrier’s survival. In a statement, the carrier said that all four of its creditor classes had voted in favour of the proposal. The vote marks a huge step forward in Virgin’s bid to remain flying after six months of turbulence caused by the Covid-19 pandemic.
As a result of government restrictions worldwide, the carrier was forced to suspend all of its flights for several months, and has said it will cut 3,500 of its 10,000 staff. It had warned that if the proposal had been rejected, it would run out of cash by the end of September. Under the proposal approved today, it will have sufficient funding to survive the next 18 months.
A spokesperson for the airline said: “In order to complete the private-only, solvent recapitalisation of the airline, our restructuring plan is going through a court-sanctioned process under Part 26A of the UK Companies Act 2006.
“Today, Virgin Atlantic has reached a significant milestone in safeguarding its future, securing the overwhelming support of all four creditor classes, including 99 per cent support from trade creditors who voted in favour of the plan. The airline will now go to the High Court on 2 September to get a court sanction for the deal. Finally, a US Chapter 15 procedural hearing will follow on 3 September, ensuring the plan is recognised in the US.
Virgin Atlantic agreed the private-only deal back in July, but needed 75 per cent of its creditors to back the rescue package. Over 200 creditors, each owed at least £50,000 by the airline, voted on the deal, which will see Virgin receive £600m from shareholders. Parent company Virgin, which owns 51 per cent of the airline, will contribute £200m. Investment firm Davidson Kempner Capital Management will also provide £170m in financing. Under a new form of recapitalisation, judges would have been able to overrule creditors if they had voted against the proposal.
Back in April, it was reported that the government had ruled out a £500m rescue deal for the carrier on the grounds that it had not exhausted all the ways it could have raised the money privately. At the time, chancellor Rishi Sunak said that money would be made available for struggling airlines only as a “last resort”.
Virgin Australia to cut 3,000 jobs as carrier slims down under new owners
Earlier this month sister airline Virgin Australia announced it would cut 3,000 staff as it seeks to streamline its business under prospective new owner Bain Capital. In June Bain bought the carrier out of administration, with creditors due to vote on the sale on 4 September. If the deal is approved, the airline will focus on the domestic and short-haul international market, targeting the profitable value-for-money market.
Alongside the job cuts, which account for a third of its staff, Virgin will get rid of its largest planes and instead concentrate its fleet operations on Boeing’s 737. After seven years of losses, the Covid-19 pandemic was the final straw for the carrier, which went bankrupt as air travel collapsed around the world.
Administrators selected Bain to take over the company after an auction, pending approval from the firm’s bondholders, who are owed AU$7bn (£3.8bn).
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