Virgin Atlantic has taken a step toward securing its future, announcing plans for a recapitalisation.
The move was necessary following the severe impact of the Covid-19 pandemic on the global economy, the carrier said.
The five-year business plan, which has the support of shareholders Virgin Group and Delta, new private investors and existing creditors, paves the way for the airline to rebuild its balance sheet.
Virgin hopes to return to profitability from 2022.
The recapitalisation will deliver a refinancing package worth £1.2 billion over the next 18 months in addition to the self-help measures already taken, including cost savings of £280 million per year and £880 million rephasing and financing of aircraft deliveries over the next five years.
Shareholders are providing £600 million in support, including a £200 million investment from Virgin Group, and the deferral of £400 million of shareholder deferrals and waivers
To secure approval from all relevant creditors before implementation, the plan will go through a court-sanctioned process under Part 26A of the Companies Act 2006.
With support already secured from the majority of stakeholders, it is expected that the restructuring plan and recapitalisation will come into effect in late summer.
Shai Weiss, chief executive, Virgin Atlantic commented: “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.”
Davidson Kempner Capital Management, a global institutional investment management firm, is providing £170 million of secured financing as part of the deal.
Having closed its London Gatwick base, while retaining a slot portfolio at the airport to protect opportunities for future growth, leisure flying from Virgin Atlantic is now consolidated at London Heathrow and Manchester.
The airline also cut 3,500 jobs across all functions earlier this year.
By 2022 Virgin Atlantic is hoping to fly the same number of sectors as 2019 despite its smaller scale.
The airline will operate a streamlined fleet of 37 twin engine aircraft following the retirement of seven Boeing 747s and four Airbus A332s by quarter one of 2022.
The carrier will also rescheduled delivery of outstanding A350s and A339s.
Virgin is currently rebuilding its route network, with commercial operations set to begin again on Monday.