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Welcome to London Air Travel’s Monday Briefing for the week beginning 13 July 2020.
Virgin Atlantic Refinancing
Virgin Atlantic is reported to be close to agreeing on a refinancing of the airline with its two shareholders and its creditors.
Based on reports, principally by Mark Kleinman of Sky News, Delta and Virgin Group will retain their respective 49% and 51% shareholdings in the airline.
Virgin Group is reported to be making a contribution of around £200m. Though, it is not clear how much of this is cash. Some of Virgin’s contribution will in the form of the deferral of brand licence fees. Delta will also agree to defer payments for IT services and revenues it is due under the transatlantic joint-business.
Additional debt funding should be provided by Davidson Kempner Capital Management. According to The Sunday Times this will be secured against Virgin assets, including its Heathrow slot portfolio. However, it will rank behind Virgin’s bondholders who also hold security over Virgin’s Heathrow slots, following the issue of a £220m bond in 2015. These bondholders will also need to approve the refinancing package.
According to Sky News, one of Virgin’s credit card acquirers, Cardnet, has agreed to a deal which will allow it to release withheld card payments from customers. Negotiations are still underway with Virgin’s other card acquirer, First Data.
Sky News also suggests that the overall financing package will require court approval.
The Sunday Times has also claimed that Virgin has pledged to be profitable by 2022 – with business travel unlikely to return in any meaningful form until well into 2021, this is no mean feat.
Virgin is due to resume scheduled passenger flights from next Monday. It would obviously be good from a PR perspective to be able to do so whilst saying its future has been secured, as well as instilling confidence in its suppliers.
BA Returns To Gatwick
BA will this week operate its first scheduled flights at London Gatwick in over three months.
Flights to Bermuda resume this Friday 17 July. Barbados resumes on Saturday 18 July. Kingston follows on Monday 20 July.
As the South Terminal is closed, these flights will depart from the North Terminal.
BA short-haul flights will not resume at Gatwick until September at the earliest.
Also At Heathrow This Week
BA will also add a substantial number of long-haul and short-haul routes at London Heathrow this week.
Scheduled passenger flights to Dallas / Fort Worth and Toronto resume this Thursday. Dubai will follow on Friday.
These destinations have been served by cargo-only flights which provides an indication of which other long-haul destinations are likely to resume next.
Turning to short-haul, flights to Inverness and Newcastle resume this Thursday.
Athens, Basel, Billund, Brussels, Budapest, Dusseldorf, Hamburg, Hannover, Istanbul, Reykjavik, Sofia also resume on Thursday. Prague follows on Friday.
Summer seasonal routes to Crete and Santorini restart at Heathrow on Thursday. Corfu, Dalaman and Mykonos resume on Friday. Kalamata, Olbia, Preveza, Rhodes and Zakynthos follow on Saturday.
BA also continues to serve more Gatwick short-haul routes at Heathrow. Menorca, Seville and Turin operate at Heathrow from Wednesday. Dubrovnik and Porto follow on Thursday. As does Verona on Friday. Funchal, Kos, Tenerife and Thessaloniki launch at Heathrow on Saturday.
Also at Heathrow, Gordon Ramsay’s Plane Food restaurant is due to reopen this Wednesday.
BA Fleet News
A few small items of BA fleet news:
We reported a couple of months ago that BA had mortgaged 48 aircraft to raise funds of $750 million from Citibank.
The exact terms of the loan were not disclosed. BA has since also mortgaged its first Boeing 787-10 aircraft, G-ZBLA, to draw down funds under this loan agreement. This suggests that the original mortgage of 48 aircraft did not cover all of the $750m loan. It appears that each time BA wants to draw down funds from the loan, it has to provide further aircraft as security.
BA has used Airbus A320neo and A350-1000 aircraft as collateral for a $806 million “Enhanced Equipment Trust Certificates” bond issued last year, so it will not be able to mortgage these aircraft.
A recent filing of BA’s own annual accounts also shows that it has let options for 6 Boeing 787-9 aircraft lapse, meaning its planned fleet of Boeing 787 family aircraft will stay at 42.
BA has also let options for Airbus A320 family aircraft fall from 33 to 10 aircraft, suggesting it is ultimately intent on ordering the Boeing 737 MAX aircraft.
South African Airways Business Rescue Plan
Creditors are due to vote on a Business Rescue Plan for South African Airways tomorrow.
This vote has been previously delayed. It requires a 75% vote in favour.
Should the plan be accepted, a new airline will effectively emerge and existing staff will be offered voluntary severance packages. Negotiations have been underway between the Business Rescue Practitioners and trade unions over the past couple of weeks. These have been accepted by many trade unions, but not the South African Airways Pilots’ Association. If there is no vote in favour, it is likely that the airline will be liquidated.
Also of note this week:
A visual diary of an Alaska Airlines flight from Seattle to Boston. (New York Times)
Late post publication updates:
[Reserved for updates throughout the day]
A number of Heathrow slot trades for the winter season have been published by Airport Coordination Ltd:
Two daily slot pairs leased by Virgin Atlantic to Flybe have returned to the airline.
Virgin has also taken back a daily slot pair leased to Vueling who will lease a daily slot pair from BA instead.
Virgin has also taken back a daily slot pair leased to Finnair who will lease a daily slot pair from Etihad. BA has returned a daily slot pair back to Etihad.
BA has also returned a daily slot pair back to American Airlines.
Air New Zealand is also leasing its Heathrow slot to United Airlines.
Kuwait Airways has also returned two weekly slot pairs to Asiana Airlines.
Staying at Heathrow, CEO John Holland-Kaye has said that Terminal 3 may reopen this year. This will depend on how demand returns in the autumn. At present, flights are booked around two weeks in advance, giving little visibility on future booking trends. Terminal 4 will not reopen until 2021 at the earliest.
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