Richard Branson Secures Lifeline for Virgin Atlantic
July 14 2020 - 2:30PM
Dow Jones News
By Alistair MacDonald and Benjamin Katz
LONDON -- Richard Branson's Virgin Atlantic Airways said it
secured a financial package worth about $1.5 billion that will
allow it to stave off bankruptcy and provide some breathing room
for the British billionaire's broader effort to stabilize his
travel and tourism empire amid the pandemic.
Mr. Branson's Virgin Group will invest GBP200 million ($250
million) in the U.K.-based airline, a popular option for
trans-Atlantic flights. U.S.-based investment firm Davidson Kempner
Capital Management LP will provide GBP170 million in secured loans.
The deal is contingent on the airline making savings through
deferrals of fees and advances from payments companies and aircraft
lessors. The company will also push back orders of new Airbus SE
aircraft, it said.
Virgin Group will retain its 51% controlling stake in the
airline, and its U.S. partner Delta Air Lines Inc. will continue to
hold the remaining 49%. Both companies are deferring fees on things
such as using the Virgin brand name and the use of Delta's booking
system, Virgin said.
Airlines have been retrenching dramatically amid a
near-standstill to air travel worldwide amid the coronavirus
pandemic. They have furloughed or let go hundreds of thousands of
staff, deferred or canceled new aircraft orders and grounded
flights, drying up revenue.
Unlike in the rest of Europe, where the likes of Deutsche
Lufthansa AG and Air France-KLM have received billions of dollars
worth of loans from local governments, the U.K. opted to forego an
aviation-specific bailout strategy. That triggered a monthslong
search by Virgin Atlantic for external funding to keep its
operations ticking.
"Undoubtedly, the last six months have been the toughest we have
faced in our 36-year history," said Shai Weiss, Virgin Atlantic's
chief executive, in a statement.
Virgin Atlantic was poised to turn its first profit since 2016
this year, until the coronavirus struck, forcing it to cut flights
by 98% in the second quarter and lay off 3,550 workers. The airline
said in its statement that it expects capacity to be reduced by 60%
in the second half of 2020 from the year before and predicts
precrisis levels of flying won't return until 2023.
Last month, U.S. private-equity firm Bain Capital agreed to buy
Virgin Atlantic's insolvent sister airline Virgin Australia
Holdings Ltd., charting a future involving fewer and smaller planes
and mirroring strategies adopted by other carriers, including in
the U.S.
Mr. Branson has been among those at the very center of the
financial pain the pandemic has unleashed. Much of his sprawling
business empire is geared toward travel and leisure, industries
particularly hard hit amid the crisis. Other Virgin holdings
include a cruise business that had just received its first vessel
and a U.S. hotel group that had intended to open several properties
this year.
To shore up his businesses, including Virgin Atlantic, Mr.
Branson's group sold around 12% of another big holding, Virgin
Galactic Holdings Inc. -- the space-tourism venture that made its
initial public offering in New York last year.
Write to Alistair MacDonald at alistair.macdonald@wsj.com and
Benjamin Katz at ben.katz@wsj.com
(END) Dow Jones Newswires
July 14, 2020 14:15 ET (18:15 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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