Category: Virgin Atlantic

London Air Travel » Virgin Atlantic

Virgin Atlantic has announced a new package of financial support measures for the airline.

The package comprises both the direct injection of cash as well as cash flow support through the deferral of fees.

Throughout the course of negotiations various numbers have been put on the package from upwards of £500m. Today’s package has been valued at £1.2bn over the next 18 months.

In addition, Virgin will seek to achieve cost savings of £280m a year and savings of £880m over the next five years through the deferral and refinancing of the delivery of new Airbus A350-1000 and Airbus A330 neo aircraft.

The restructuring package is based on a five year business plan where 2019 demand for air travel may not recover until 2024. Virgin Atlantic aims to be profitable by 2022.

Speaking to the Financial Times, Virgin Atlantic CEO Shai Weiss said:

“This is not a plan for another plan . . . our job has been to take a very severe look into 2021 specifically. We funded the plan for the worst case rather than best case as you would expect us to do.”

Under the package, Virgin Group will retain 51% control of Virgin Atlantic. Delta will also remain a 49% shareholder. Delta has today, in announcing its own financial results, written down its investment in Virgin Atlantic and taken a charge of $200m.

Virgin Group will provide the airline with a direct cash injection of £200m. Virgin Group has disposed of some its interest in Virgin Galactic to fund this. It will also defer payments for the use of the Virgin brand name and logo.

US private equity firm Davidson Kempner Capital Management will provide £170m of new debt. This will be secured against assets of the airline.

Delta Air Lines will not provide any direct financial investment as it is prohibited from doing so having received support from the US government under the CARES (Coronavirus Aid, Relief, and Economic Security) Act.

Delta has agreed to defer payments for shared services such as IT and payments due to it under its transatlantic joint-business with Virgin Atlantic. The total value of deferred fees to Delta and Virgin has been put at £400m over the life of the plan.

According to news reports, Virgin’s credit card payment processors, Cardnet and First Data, have also agreed to release funds they have withheld in case of the airline’s collapse.

The financial support package will require court approval and this should be granted within the next 43 days. Virgin’s bondholders who hold security over Virgin Atlantic’s slots at London Heathrow will need to support the package. There will inevitably be a lot of legal detail that has not been disclosed today.

Continue reading “Virgin Atlantic Secures Financial Support Package”

London Air Travel » Virgin Atlantic

News on the planned refinancing of Virgin Atlantic has been relatively quiet in recent weeks.

That’s not necessarily a bad sign. Leaks to the press happen for a reason and less so when people are busy making progress behind closed doors.

Mark Kleinman of Sky News has today, Saturday 27 June 2020, published an account of the current state of play.

The planned refinancing of Virgin Atlantic is complex with multiple interests and parties involved.

Based on the account by Mark Kleinman, who obviously has excellent sources and is consistently ahead of his competitors, this is the current state of play.

Virgin Atlantic is targeting an overall privately funded package of around £800m-£900m. This is higher than its earlier stated target of £750m of government and private sector support. Virgin seems to have given up on any hope of state support.

There is an informal deadline of early July to have at least an outline agreement in place.

It is also claimed that much of the overall package of funding for Virgin will come from the deferral of fees and payments owed by the airline, rather than new capital.

Delta and Virgin Group

Virgin Group and Delta Air Lines who own 51% and 49% of the airline respectively are said to be providing around £250m of new funding for Virgin Atlantic.

How this will be comprised is not clear.

In the case of support from Delta and Virgin Group, Delta CEO Ed Bastian has previously said it is unable to provide further financial support due to it having received financial assistance from the US Government under the CARES (Coronavirus Aid, Relief, and Economic Security) Act.

Virgin Group has disposed of some its interest in Virgin Galactic to raise nearly $500m in funds to support Virgin businesses.

Currently, Virgin Atlantic and Virgin Holidays pay a percentage of their revenues as a royalty for the use of the Virgin name and logo to a company called VAL TM Ltd. In the last published accounts for VAL TM Ltd for the year to 31 December 2018, it reported revenues of over £19m.

Virgin Atlantic and Delta also make sales and purchases between each other under their transatlantic joint-business. In Virgin Atlantic’s last published accounts for the year to 31 December 2018, it made £6.4m of sales to Delta and purchases of £72.2m from Delta.

Under a concept known as “transfer pricing” Virgin Atlantic has to make “arms length” payments to Delta and Virgin Group for services it receives from them, but deferring these would at least provide some cash flow relief.

Whilst Virgin Group is expected to retain control of Virgin Atlantic, it has not been confirmed whether Delta will retain its shareholding.

Other Support

As has been previously reported, Elliott Management Corporation are in discussions to provide up to £250m in debt funding. As is Davidson Kempner Capital Management which is said to be a marginal front runner.

These organisations are no pushover. They will not provide new funding unless they are confident they can get it back regardless of what ultimately happens to Virgin Atlantic. How they will obtain security given Virgin leases most of its fleet and has already mortgaged Heathrow slots is not known.

Virgin is also hoping to secure support from credit card companies who have been withholding funds because of the risk of the airline falling into administration.

The airline also has a revolving credit facility of $237m, secured against certain assets, which is due to expire in 2021 and it is seeking to amend and extend.

Continue reading “Virgin Atlantic “Racing To Stitch Together £900m Rescue””

London Air Travel » Virgin Atlantic

Virgin Atlantic has unveiled plans for a radical restructuring as it seeks to secure Government support for a state backed loan.

The airline is in consultation with its trade unions on job cuts of up to 3,150 staff, which is almost a third of its workforce.

Virgin Leaves London Gatwick

Virgin will consolidate its London operations at London Heathrow for the foreseeable future.

The airline has already temporarily transferred operations from Gatwick, where it used to operate routes such as Antigua, Barbados, Grenada, Montego Bay and Orlando, to Heathrow.

The airline had already planned to transfer its service to Havana to Heathrow in June. St Lucia was also due to be suspended in June.

Virgin was due to reinstate a service New York JFK at Gatwick this summer, which will now not happen. Passengers with bookings from Gatwick will be contacted in the coming days with their new flight details.

Virgin plans to lease its slots at Gatwick to enable a return to the airport. Though, with Norwegian also temporarily leaving the airport until 2021 and uncertainty over BA’s presence at the airport, it will be difficult to find airlines willing to operate them.

The departure of Virgin Atlantic from Gatwick is symbolic as it was of course where it launched its first flight to Newark in 1984.

At Heathrow, where the airline has temporarily transferred flights to Terminal 2, Virgin has suspended Newark and cancelled plans to launch Sao Paulo. At present, a planned winter seasonal service to Cape Town is still due to go ahead.

Fleet

Virgin Atlantic will immediately retire its last seven remaining Boeing 747 aircraft.

It will also retire four Airbus A330-200 aircraft by early 2022. Virgin accelerated the retirement of its last three Airbus A340 aircraft earlier this year.

Virgin has not made any comment on plans for the delivery of its remaining Airbus A350-1000 aircraft, which were all due to be delivered by 2021.

The airline remains in discussions with the UK government about state support which could include a loan and a credit guarantee to prevent credit companies from withholding funds. Virgin is also in discussion with third party investors to secure additional finance. Delta, which owns 49% of the airline, says it is unable to provide any financial support.

According to leaked comments from the Treasury, it did not consider Virgin Atlantic’s business plans for the next 2-5 years to be realistic. These deep capacity cuts, along with some form of contribution from its two shareholders, should assist in making a case for state support.

London Air Travel » Virgin Atlantic

Virgin Atlantic is to temporarily transfer what few remaining flights operate from London Gatwick to London Heathrow airport.

This will take effect for outbound flights from Tuesday 24 March 2020.

The last outbound flights from London Gatwick operated today, Monday 23 March.

On Tuesday 24 March, the last inbound flights will arrive at London Gatwick. These are VS90 from Grenada and St Lucia and VS34 from Antigua.

On Tuesday 24 March, flight VS147 to Havana (formerly VS63 when operated at Gatwick) and VS133 to Antigua (formerly VS33 when operated at Gatwick) will operate from London Heathrow.

A number of destinations Virgin Atlantic ordinarily serves from Gatwick, such as Orlando, are suspended due to travel restrictions.

As Virgin is currently operating a severely limited schedule until the end of April, this arrangement is likely to continue for some weeks at least.

There has been a recent trend for Virgin to transfer routes from Gatwick to Heathrow. Havana was due to transfer Heathrow in June 2020 and Las Vegas was transferred last year. Other routes such as Cancun and St Lucia have been suspended.

If the medium to long term impact of Coronavirus does lead to a significant fall in demand for air travel, the transfer from Gatwick to Heathrow could well become permanent. Should Norwegian permanently withdraw from Gatwick and BA follow Virgin, this would be very damaging to the airport.

London Air Travel » Virgin Atlantic

Virgin Atlantic is to temporarily close all of its Clubhouse lounges.

Upper Class passengers and eligible members of the Virgin Atlantic Flying Club and partner airline programmes will no longer be able to access these lounges.

Virgin’s lounges at Boston, Johannesburg, London Gatwick, Los Angeles, San Francisco and Washington Dulles are closed.  

The lounge at Newark has also closed permanently due to the suspension of the route.

At London Heathrow, the Upper Class Wing and Revivals Lounge has closed.

Services in the Clubhouse lounge at London Heathrow Terminal 3 are reduced with no deli bar, salon & spa or shoe shine service.  The bar and the brasserie will remain open. The lounge will close temporarily from Monday 30 March 2020.

The New York JFK Clubhouse lounge will also remain open, but with reduced services.

Continue reading “Virgin Atlantic Closes Clubhouse Lounges”