By Helen Coffey, The Independent.
Virgin Atlantic has warned it will “run out of money altogether” by the final week of September if creditors do not agree to a £1.2bn bailout package tomorrow.
The rescue deal, which includes proposing creditors accept a 20 per cent chop in the money the airline will pay them back, will be voted on at the High Court.
Some 170 parties to whom the Sir Richard Branson-owned carrier owes payments must also agree to receive their cash back in staggered instalments.
The airline “remains confident” that the complex refinancing package will be approved. The Independent has approached the airline for additional comment.
As well as appealing to creditors to accept less money, Virgin Atlantic has also shut down its Gatwick base and announced it is canning 3,150 jobs – around a third of all employees – to cut costs.
The brand’s owners – Virgin Group, which owns 51 per cent, and shareholder Delta Air Lines, which owns 49 per cent – are stumping up £600m to help keep the airline afloat, while £170m in financing is being fronted by US hedge fund Davidson Kempner Capital Management.
Earlier this month, Virgin Atlantic filed for protection from creditors in line with Chapter 15 of the US Bankruptcy Code in the States, alongside a separate court hearing in the UK.
It insisted that support for the restructuring plan was “already secured from the majority of stakeholders”, although the company’s lawyers warned that the carrier would find itself in a critical cashflow situation in September if the deal did not go through.
Virgin Atlantic’s restructuring plans are based on the prediction that the airline will become profitable again in 2022.
Like all airlines, Virgin Atlantic has been hit hard by the coronavirus pandemic, which saw the grounding of flights worldwide for much of 2020.
British Airways has already cut more than 6,000 staff through voluntary redundancy and mothballed its £200m Heathrow base; easyJet has announced that it will close its bases at London Stansted, London Southend and Newcastle airports from 1 September, as well as slashing 30 per cent of jobs; and Jet2 is making 102 pilots redundant.