Business

Virgin Atlantic seeks urgent rescue package worth up to £900m

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Virgin Atlantic is attempting to secure a privately funded rescue deal worth up to £900m by the end of this week as it fights to survive after the slump in international travel during the coronavirus pandemic.

The airline is in talks with hedge funds about borrowing about £250m and is lining up more than £200m from shareholders including founder Sir Richard Branson and Delta Airlines, which owns 49% of the company.

Virgin Atlantic is also talking to plane manufacturers, credit card companies and leaseholders about the deferral or cancellation of payments worth hundreds of millions of pounds.

One source said there were as many as 60 separate discussions about potential funding lifelines.

Virgin has set an “informal deadline” of early July to finalise a deal, according to Sky News, but is understood to be able to stretch talks beyond that deadline if necessary.

Airlines across the world have been rocked by the grounding of flights amid pandemic lockdowns, which have jeopardised their business models.

Virgin said it could take three years for flight numbers to return to 2019 levels.

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The company has been told by the government it must explore all private options for finance before any public bailout will be considered. Talks with the government also continue about a potential injection of as much as £100m, it is understood.

The company has already announced more than 3,000 job cuts, is reducing the size of its fleet, and ending flights from Londons Gatwick Airport.

Virgin Atlantic said: “We continue to explore all available options to secure additional external funding as part of a comprehensive, solvent recapitalisation of the airline. As per the chancellors letter of 24 March, HM government is considered as a lender of last resort, and rightly so.

“We have already made difficult decisions and taken decisive action to reduce our costs, preserve cash and protect as many jobs as possible. In parallel, constructive negotiations with our shareholders, creditors and partners as well as private investors and HM government are progressing at pace, so that Virgin Atlantic can emerge from the crisis sustainably profitable and with a healthy balance sheet.

“While more work needs to be done, we greatly appreciate the support our stakeholders have shown to date and believe we can deliver a comprehensive financing package that ensures Virgin Atlantic continues to provide essential connectivity and competition to consumers and businesses in Britain and beyond.”

Advisers from Alvarez & Marsal have been lined up to prepare a pre-pack administration deal if the airline is not able to secure a deal.

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