Virgin Atlantichas unveiled images of the interiors of its new Airbus A330neo aircraft.
Virgin ordered up to 16 Airbus A330neo aircraft in 2019. The first aircraft will arrive in September this year. As is common for new aircraft at Virgin it will first operate to Boston, one of its relatively shorter routes, from October.
Three aircraft are expected to arrive this year. The remaining aircraft will be delivered between 2023 and 2026.
At the time of the order it was intended they would operate across Gatwick, Heathrow and Manchester. Much of course has changed since then.
Virgin has not indicated this aircraft will have separate configurations for relatively business and leisure heavy routes, like the Airbus A350.
There is only so much you can discern from images and cabin mock-ups. The real test is when the aircraft is flying with passengers, but here are the details released by Virgin.
Virgin Atlantic has launched a new route from London Heathrow to Tampa, Florida.
Virgin will fly to Tampa from Thursday 3 November 2022. Flights will initially operate four times weekly and increase to daily from Monday 28 November 2022. The service will operate year round.
The city of Tampa on the Gulf Coast of Florida is Virgin Atlantic’s third destination in the state, after Miami and Orlando. Passengers visiting Florida can of course mix arrival and departure airports.
Virgin Atlantic has launched a new codeshare partnership with LATAM Airlines.
Virgin Atlantic has placed its code on LATAM flights between London Heathrow and Sao Paulo.
Virgin Atlantic passengers will also be able to connect to 12 destinations in Brazil. These are Rio de Janeiro, Porto Alegre, Belo Horizonte, Brasilia, Curitiba, Goiania, Recife, Salvador, Florianopolis, Fortaleza, Vitoria and Londrina.
Virgin Atlantic has launched a new route from London Heathrow to Austin, Texas.
The airline will fly from London Heathrow to Austin–Bergstrom International Airport four times weekly from Wednesday 25 May 2022.
Flights will operate on Monday, Wednesday, Friday and Sunday. It’s not immediately clear whether the route initially operate on a summer seasonal basis or year round.
The route will be operated with a Boeing 787-9 Dreamliner aircraft.
This is Virgin’s first ever route to Texas and its first new route to the US in many years. It is even longer since Virgin launched a destination in the US that is not a hub of its transatlantic joint business partner Delta.
Virgin Atlantic has just published, somewhat belatedly, its annual report and financial statements for the year to 31 December 2019.
Although the report was clearly drafted months ago in advance of it recapitalisation last year, it has only just been published on the Virgin Atlantic website and has not yet been filed at Companies House.
The airline group, which includes Virgin Holidays, reported a loss before tax and exceptional items for the year of £29.5m.
Like all airlines, Virgin Atlantic has been severely impacted by COVID-19. The court sanctioned solvent recapitalisation in July enabled Virgin Atlantic to secure new sources of debt and partial relief of debts owed to creditors.
When a company prepares a set of financial statements, its Directors are required to assess the ability of the company to continue to trade as a going concern. The company’s auditors are also required to comment on this.
To do this, Virgin Atlantic has modelled different scenarios for the resumption of passenger flights through 2020 and 2021. These are detailed extensively from page 57 of the report.
The airline has modelled its ability to trade as a going concern on an expected case of travel restrictions being lifted throughout 2021. In this instance, Virgin considers that, following its solvent recapitalisation, it would have sufficient funds to continue to trade for the next 12 months.
Virgin has also modelled an alternative scenario with more severe travel restrictions remaining in place until the summer, dubbed the August 2021 scenario. In this instance, Virgin Atlantic and its auditors have stated that further measures will be required to ensure the airline can continue to trade.
Virgin has since undertaken further measures such as the sale and leaseback of aircraft. Before its solvent recapitalisation, Virgin did seek state support but was rebuffed by the Treasury. Given that Virgin’s ability to operate passenger flights is in part impacted by restrictions imposed by the UK government and BA has secured a state guaranteed loan of £2 billion, it may have a stronger case for state support.
Virgin Atlantic is to launch a new route from London Heathrow to the Caribbean island of St Vincent from June 2021.
This will be the only direct service to the island from Europe. Virgin Atlantic will fly to St Vincent twice weekly. The island is served by Argyle International Airport.
Flights will operate twice weekly with Airbus A330-300 aircraft. As is par the course with new route announcements Virgin Atlantic, flights have not yet gone on sale. Nor has Virgin provided an indicative schedule. Flights should be on sale from Tuesday 24 November.
This move reflects, in part, a “pivot” to leisure traffic. Virgin’s official release alludes to relatively less stringent COVID-19 testing and quarantine restrictions in the Caribbean. Though, in truth, nobody knows what COVID-19 travel restrictions will be in place in six months’ time.
At present, all Virgin Atlantic flights are operating from London Heathrow Terminal 2. No date has been given for the reopening of Terminal 3. Based on current trends, this will be many months away.
Virgin Atlantic is to launch two new routes from London Heathrow to Lahore and Islamabad.
The flights will launch in December and will go on sale in September.
Virgin will fly from London Heathrow to Lahore four times weekly and to Islamabad three times weekly.
The airline has not confirmed exact details on aircraft and timings. Virgin will also fly from Manchester to Islamabad.
This decision is likely to be driven in part by the fact that the European Aviation Safety Agency has banned Pakistan International Airlines from flying to the European Common Aviation Area. Although, the Civil Aviation Authority has allowed Pakistan International Airlines to wet lease aircraft from other airlines.
Airlines are currently focused on routes that generate cash. A route such as this should provide sufficient passenger volumes from VFR (Visiting Friends & Relatives) traffic to be cash flow positive.
BA also flies from London Heathrow to Islamabad having returned to the city in 2019 after a gap of more than ten years. This will increase to five times weekly in September and daily in October. It would be surprising not to see a similar competitive response from BA.
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.
“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.
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.
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.
Virgin Atlantic is to restart flying to more destinations at London Heathrow, with the aim of reinstating most of its London route network by the end of October 2020.
Virgin will restart scheduled passenger flights from Monday 20 July, flying from London Heathrow to Hong Kong. Los Angeles and New York JFK will follow on Tuesday 21 July.
The following Virgin Atlantic routes will be added in August:
Saturday 1 August – Barbados Tuesday 4 August – Shanghai Tuesday 18 August – Miami Sunday 23 August – Lagos
The following Virgin Atlantic routes will be added in September:
Tuesday 1 September – Delhi, Las Vegas, Mumbai, Seattle and Washington Dulles Sunday 6 September – Tel Aviv Tuesday 8 September – San Francisco Friday 14 September – Johannesburg Saturday 15 September – Atlanta
The following Virgin Atlantic routes will be added in October:
Thursday 1 October – Antigua, Boston Friday 2 October – Montego Bay, Grenada (via Antigua) Sunday 4 October – Tobago (via Antigua) Tuesday 6 October – Orlando