Rescue package means airline's future secured

Creditors agree on Virgin Atlantic bailout that should save 6,500 jobs

Virgin Atlantic, the airline that is majority-owned by billionaire Richard Branson, has cleared a major hurdle in its battle to keep flying, with creditors agreeing this week to support a 1.2-billion-pound ($1.6-billion) rescue plan that should secure its future for at least the next year and a half.

The BBC says the deal has been backed by aircraft owners, banks, equipment suppliers, and shareholders and should mean 6,500 jobs that were under threat will be saved.

A spokeswoman told the Reuters news agency: "Virgin Atlantic has reached a significant milestone in safeguarding its future, securing the overwhelming support of all four creditor classes, including 99 percent support from trade creditors who voted in favor of the plan."

She said the company, which operates a fleet of 40 wide-body planes, is looking forward to restoring customer confidence and welcoming passengers "back to the skies as soon as they are ready to travel".

The airline, which like so many in the industry has been under massive financial pressure because of travel restrictions introduced in a bid to restrict the spread of the novel coronavirus, said the deal means it will be able to "rebuild its balance sheet".

US-based airline Delta, which owns 49 percent of Virgin Atlantic, said it is "optimistic that this plan will allow Virgin Atlantic to secure its future".

Virgin Atlantic had previously warned it was likely run out of cash by September without a deal in place.

It must now gain official regulatory approval of the deal in the High Court in London on Sept 2 and in a procedural hearing in the United States on Sept 3.

The airline industry has been among the sectors of the economy that have been hardest-hit by the pandemic, with American Airlines being forced to cut 19,000 jobs and Virgin Australia, a separately run enterprise, entering voluntary administration in April.

The International Air Transport Association said in June that airlines are likely to lose $84 billion this year.

Despite the deal, Virgin Atlantic will cut 3,500 jobs as part of a restructuring process. And it has closed its base at London's Gatwick Airport.

The Reuters news agency noted that the deal agreed on Tuesday was with smaller creditors and followed a similar arrangement being reached between the 36-year-old airline and major creditors back in July.

The Bloomberg news agency said the airline had been plunged into crisis when the UK government refused its request for a 500-million-pound bailout earlier this year.

The Financial Times added that the deal included a group of about 170 companies to whom the airline owed money agreeing to accept a 20 percent "haircut" on those debts and to receive that money in a staggered set of payments.