Crucial Week For Virgin Atlantic

Virgin Atlantic’s survival hangs in the balance this week and is dependent on whether its creditors approve a 20% haircut and staggered payments for the rest, as a part of a £1.2 billion rescue package.

The airline should survive this vote as it did consult with its creditors in July when it came up with this court-appointed restructuring process (read more here) that also saw its US operations file for chapter 15 bankruptcy protection (read more here).

You can access Virgin Atlantic here.

Financial Times ran a story yesterday about the challenged the Virgin Atlantic faces of which below is an excerpt:

Support at the vote, which is scheduled for Tuesday at the High Court, London, would be the final piece in the puzzle of the airline’s complex rescue package.

About 170 of Virgin Atlantic’s top suppliers, ranging from aircraft lessors to media buying agencies, are being asked to accept a 20 per cent reduction on the money the airline owes them, and to receive the rest in staggered payments.

Shai Weiss, chief executive, told the Financial Times in July that he was confident the deal with creditors would go through as it was only launched after the negotiations had been finalised.

Conclusion

I would imagine that the unsecured debtors will accept the package because the likely other scenario is that they get absolutely nothing.

Difficult to see, however, how the amount of fresh funds the airline gets during this process is adequate (less than £400M) to see it through the Covid-19 related travel slump that is dragging on longer than airlines wish.

The problem that Virgin Atlantic also has is that it only operates long-haul routes, which are mostly affected. Airlines with robust domestic/regional networks at least get some money in.

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