Virgin Atlantic Secures £400 Million Funding From Branson, Delta
Virgin Atlantic Secures £400 Million Funding From Branson, Delta
(Bloomberg) -- Virgin Atlantic Airways Ltd. owners Richard Branson and Delta Air Lines Inc. agreed to provide a 400 million-pound ($530 million) capital injection into the U.K. carrier to see it through the latest slump in global travel.
Branson’s Virgin Group will cough up 204 million pounds of the funding and Atlanta-based Delta the rest, allowing them to maintain their current holdings of 51% and 49% respectively, Virgin Atlantic said in a statement Monday.
The financing will help bolster Virgin Atlantic’s balance sheet as the omicron variant of Covid-19 threatens to strangle off a revival in long-haul travel. Bloomberg reported last month that the company was exploring fund-raising options to help tap what was expected to be a rapid rebound in transatlantic demand after the U.S. eased border curbs. Since then, the new strain has caused people to delay booking flights and governments impose fresh restrictions.
“Virgin Group and Delta Air Lines, and our creditors, have been a source of unwavering support,” Chief Executive Officer Shai Weiss said in the release. He said that Virgin Atlantic sees a return to sustainable profitability in 2023, driven by improved demand and 300 million pounds of savings already achieved.
Delta said earlier that it would invest $1.2 billion in three partner carriers, building a stake of 20% in Grupo Aeromexico SAB and a 10% position in Latam Airlines Group SA in addition to the Virgin Atlantic financing.
Virgin Atlantic said agreements with creditors will deliver a 200 million-pound reduction in its cash burden through 2024, while credit-card processing firms are continuing to show support. The airline said that aircraft deliveries through the second quarter of 2024 are fully financed.
Virgin Atlantic had earlier in the year considered listing on the London Stock Exchange, before pushing that plan into 2022 to focus on rebuilding its business amid what appeared then to be a strengthening global market.
Bookings for Easter and summer of next year are “robust,” the statement said.
The carrier averted collapse last year with the support of a 1.2 billion-pound rescue package from owners and lenders after the U.K. government refused it access to state funds.
The long-distance flights in which Virgin Atlantic specializes have lagged behind shorter ones in recovering from the pandemic, with the emergence of the omicron strain the latest setback as it effectively shut down travel between the U.K. and South Africa, a market in which Virgin is a major player.
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