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| Coronavirus: Virgin Atlantic finalises £1.2bn rescue deal | |
| (32 minutes later) | |
| Troubled airline Virgin Atlantic has finalised a rescue deal worth £1.2bn. | Troubled airline Virgin Atlantic has finalised a rescue deal worth £1.2bn. |
| The package includes support from its main shareholder, Virgin Group, and loans from outside investors. | The package includes support from its main shareholder, Virgin Group, and loans from outside investors. |
| It also includes deferring hundreds of millions of pounds owed both to Virgin Group and to fellow shareholder Delta Air Lines. | It also includes deferring hundreds of millions of pounds owed both to Virgin Group and to fellow shareholder Delta Air Lines. |
| Virgin Atlantic had initially hoped to obtain emergency funding from the government, but ministers said any subsidies would be a last resort. | Virgin Atlantic had initially hoped to obtain emergency funding from the government, but ministers said any subsidies would be a last resort. |
| The funding comes largely from existing shareholders and a new investor, hedge fund Davidson Kempner Capital Management. | |
| The company said the plan paved the way for the airline to rebuild its balance sheet and return to profitability in 2022. | |
| The Covid-19 outbreak plunged Virgin Atlantic into an acute crisis. | |
| Like other airlines, it was forced to ground most of its fleet for months and is not due to resume services until next week. | |
| The company had initially hoped the government would step in, but ministers made it clear taxpayers' money could only be considered once all other options had been exhausted. | |
| Under the package announced on Tuesday, the airline will receive loans worth £170m from Davidson Kempner, while Virgin Group, its biggest shareholder, will put in a further £200m. | |
| Both Virgin Group and its fellow shareholder Delta Air Lines will defer payment of money owed to them by the airline worth £400m. Other creditors are expected to defer payments worth £450m. | |
| The plan will still require formal approval from Virgin Atlantic's creditors under a court-sanctioned process. | |
| The airline said more than 3,500 jobs had been lost as part of a cost-cutting drive that included the closure of its base at London Gatwick. | |
| Virgin Atlantic calls this a "solvent recapitalisation". But the question is, will it be enough to secure the company's long-term future? | |
| There is some new money here - an extra £200m in cash from the Virgin Group and loans worth £170m from Davidson Kempner. But a large part of the package is made up of deferring or waiving existing liabilities. | |
| This was probably the best the company could do in the circumstances, after the government made it clear targeted state aid would only be considered as a last resort, after private-sector options had been exhausted. | |
| But it doesn't seem to give the company much of a war chest to absorb future shocks. It is due to resume flights next week - and managers will be desperate for demand to pick up, and quickly. | |
| Virgin Atlantic has already taken drastic action to cut costs, shedding more than 3,500 staff and closing its base at London Gatwick. There's no doubt it will be a much leaner operation in future. | |
| This deal does at least keep the airline flying, but navigating its way through the stormy skies facing the industry for the foreseeable future will still be a huge challenge. |