Virgin Atlantic receives $528mn boost from shareholders

Virgin Atlantic (VS, London Heathrow) is to emerge from the COVID-19 pandemic with a bolstered balance sheet following a fresh capital injection of GBP400 million pounds (USD528 million) from its shareholders Virgin Group and Delta Air Lines (DL, Atlanta Hartsfield Jackson).

The airline expects to return to sustainable profitability from 2023, driven by a recovery in air travel demand and more than GBP300 million (USD396 million) of cost savings that have already been delivered, it said in a statement. With enhanced liquidity, the company would be able to pay down debt.

“Today’s investment puts us in a strong financial position, with a bolstered balance sheet, as we head into 2022,” Virgin Atlantic Chief Executive Officer Shai Weiss commented. “Virgin Atlantic is in a strong position to rapidly capitalise on opportunities as demand returns, and to withstand a further downturn in air travel,” the airline said.

The investment is split GBP204 million (USD269 million) from 51% shareholder Virgin Group and GPB196 million (USD258 million) from 49% owner Delta. The ownership structure remains unchanged.

This brings Virgin Atlantic’s recapitalisation, since the start of the pandemic, to GBP1.5 billion (USD1.9 billion). This includes a GBP1.2 billion (USD1.5 billion) privately funded, solvent recapitalisation on September 4, 2020, that comprised a GBP200 million (USD264 million) investment from founder Richard Branson, as well as reduced five-year fleet Capex spend by GBP880 million (USD1.1 billion). A further GBP300 million (USD396 million) injection in the first quarter of 2021 included the financing of two B787s. The GBP300 million in cost savings included a 45% reduction in the size of its workforce.

The airline said it would be able to fully finance new aircraft deliveries through to the second quarter of 2024 and was on track to reach a 100% next-generation fleet in early 2027.

Creditors would continue to support the airline with a GBP200 million (USD264 million) reduction in cash burden until 2024, and the carrier continued to have the support of credit card acquirers (Merchant Service Providers).

Commenting on the transaction, Delta Air Lines Chief Executive Officer Ed Bastian said: “Virgin Atlantic’s business has transformed, allowing them to emerge from the pandemic a stronger airline.” “With the addition of new routes and a continuing focus on operating a cleaner, greener fleet, there is much to look forward to,” added Josh Bayliss, the Chief Executive Officer of Virgin Group.