Wizz Air continues its U.K. expansion with news that the east European carrier will base an Airbus A321 at Cardiff…
Virgin Atlantic Wins Support of Creditors for Restructuring Plan
Virgin Atlantic has today won the support of its creditors over a 1.2 billion-pound ($1.58 billion) rescue package deal. The capital, only 400 million pounds of which is “new money,” is supposed to keep the airline afloat for at least the next 18 months.
Shareholders and suppliers to whom the airline previously owed money have backed the restructuring, meaning it is a step closer to implementation. The airline stated in a press release in July that it expected the plan and recapitalization would come into effect in late summer, meaning there is about a month left for the airline to meet its soft deadline.
The rescue plan still, however, requires approval from the High Court in London as per the Companies Act of 2006, which it will request on Sept. 2. However, the refinancing means that over 6,000 jobs should be safe with the airline after cutting over 3,000 jobs in May.
Earlier this month, Virgin Atlantic filed for Chapter 15 bankruptcy protection in New York as part of the process for its solvent recapitalization.
The plan includes over 600 million pounds from shareholders, 200 million pounds of which is an investment from Virgin Group; 450 million pounds worth of deferrals from creditors and 170 million pounds of secured financing from Davidson Kempner Capital Management.
Yearly cost savings of around 280 million pounds are expected as part of Virgin’s restructuring, with an additional 880 million pounds in rephasing and financing of aircraft deliveries over the next five years, meaning a delayed delivery of outstanding Airbus A350-100s and Airbus A330-900s.
COVID-19 has been one of the key push factors for Virgin Atlantic to trigger a restructuring. In the same press release, Virgin Atlantic, which has focused primarily in the past on the hard-hit international market, said that in the second quarter of 2020, flying fell by 98%. The airline also said it expected capacity to be reduced by at least 60% in the second half of this year, compared to in 2019, with pre-coronavirus levels of flying not likely to return until 2023.
Earlier this week, the airline announced that its customers — new and existing — due to travel before April 2021 will all benefit from its own, complimentary COVID-19 insurance coverage. The comprehensive policy, provided with Allianz, will cover emergency medical costs and associated expenses resulting from potential passengers contracting the coronavirus, as well as costs incurred if a customer is denied boarding or held in quarantine. The policy is even excess-free, so customers won’t pay anything within the coverage range, even if the worst happens.
The new offering is likely to encourage many customers currently uncertain about traveling abroad to book flights with the airline, given the uncertainty of U.K. travel advice resulting from the ever-evolving health crisis. Trips to countries with travel warnings are unlikely to be covered by most insurers, so even if the warning is lifted, coverage may still be restricted.
However, over 40% of Virgin Atlantic’s destinations are in the U.S., where U.K. and European citizens are still banned from visiting for leisure purposes. As a result, customer numbers are likely to dwindle until the proclamation is rescinded, as the bulk of the airline’s routes that are currently slated to restart this fall are to the country.
It could be argued that Virgin Atlantic is one of the U.K.’s worst-affected airlines by the pandemic. This is because other British airlines with networks serving Europe have been able to resume more services thanks to travel corridors being implemented by the U.K. to mainly European countries. Many of Virgin’s destinations — including those in Israel, China and India — continue to sit under “warning” status as a result of the Foreign and Commonwealth Office’s proclamations.
- Heathrow Airport Considers Vehicle Charge for COVID Losses - December 4, 2020
- Delta to Launch Quarantine Free Flights to Rome - November 27, 2020
- Emirates Keeps Hope for Airbus A380 Despite Pandemic - November 18, 2020
Singapore and Hong Kong have again postponed the launch of the much-awaited travel bubble that would connect the two Asian…
As the pandemic continues to threaten holiday air travel, airlines and aircraft manufactures are becoming more and more desperate to…