Virgin Atlantic in talks over £400mn fundraising

Virgin Atlantic (VS, London Heathrow) is in talks with shareholders about a new capital injection of around GBP400 million pounds (USD536 million) to carry the carrier through the winter, a source close to the matter has told Sky News.

Since its GBP1.2 billion (USD1.6 billion) solvent recapitalisation in September 2020, Virgin Atlantic sought a further round of funding from shareholders and creditors in March 2021 to obtain another GBP160 million (USD215 million).

However, with hopes for an initial public offering (IPO) now appearing to fade, the company’s founder and majority investor Richard Branson is expected to contribute to another capital increase. The precise amounts are yet to be finalised.

Further funding would strengthen Virgin Atlantic’s balance sheet as it looks to cash in on pent-up air travel demand as restrictions ease, the source explained, adding that it would also provide a buffer in case of new Covid-19 variant outbreaks. It also faces a winter of inflationary pressures, including oil price volatility.

A decision on the fundraising, which would also include payment deferrals and other assistance from creditors, would be announced by the end of 2021.

Luis Gallego, chief executive of British Airways owner IAG International Airlines Group, said at a conference in London on November 22 that its transatlantic bookings had already reached close to 100% of 2019 levels after the United States dropped entry restrictions earlier this month, according to a report by Reuters.

Founded in 1984, Virgin Atlantic has never sold stock to the public. Virgin Group owns a 51% stake in the carrier, with the rest held by Delta Air Lines. But Branson sold another USD300 million chunk of shares in New York-listed Virgin Galactic (OBT, Las Cruces) last week, taking the total the billionaire has raised in this manner during the pandemic to more than USD1 billion.

Virgin Atlantic, which has almost halved its workforce since the start of the pandemic, lost more than GBP650 million during 2020 and expects to sustain more losses in 2021.