Richard Branson secures $1.5 billion rescue for his airline, Virgin Atlantic.
After Sir Richard Branson’s Virgin Group had a request for government money rejected, the airline has now announced an injection of £200m, with additional funds provided by investors and creditors.
“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,” Virgin Atlantic CEO Shai Weiss said in a statement. “We have taken painful measures, but we have accomplished what many thought impossible,” he added.
Under the plan, per CNN Business, existing shareholders will contribute £600 million ($750.6 million), including £200 million ($250 million) from Virgin Group, founded by billionaire Branson. US hedge fund Davidson Kempner is providing an additional £150 million ($188 million) in secured financing and creditors have agreed to defer repayments worth £450 million ($562.5 million).
The billionaire Virgin boss calls this a “solvent recapitalisation”. But the question is, will it be enough to secure the company’s long-term future? Global aviation losses are expected to top $84 billion this year, according to the International Air Transport Association, while the industry, one of the most devastated by the pandemic, is not expected to recover to 2019 levels until at least 2023. In May, Virgin Atlantic said it would be cutting 3,500 of their staff and the closure of its base at Gatwick airport, but said the restructuring and investment plans should protect the remaining 6,500 jobs. Virgin Atlantic has only been operating cargo flights since April, but plans to restart passenger flights from July 20. It expects to be profitable again from 2022.