Virgin Atlantic gets funding offers as carrier renews plea for government aid

Airline's lack of an investment-grade credit rating means it is unable to tap Britain’s main Covid Corporate Financing Facility

Virgin Atlantic is nearing a bailout by private investors. AP. 

Virgin Atlantic Airways is seeking UK government support for a revised rescue package after attracting private offers for hundreds of millions of pounds in funding, according to sources.

The cash-strapped carrier is waiting to hear whether Britain will provide guarantees for proposals including a revolving credit facility, sources said, asking not to be named as the talks are private. Chief executive Shai Weiss’s pitch to potential backers led to offers from more than one financial institution, sources added.

Virgin Atlantic’s lack of an investment-grade credit rating means it cannot tap Britain’s main Covid Corporate Financing Facility. The Department for Transport told the carrier it should seek private funding, including from founder Richard Branson, before the government would consider underwriting a bespoke package. While the 69-year-old billionaire has pledged more cash, the airline also needs an outside investor to secure its survival.

Virgin Atlantic said it’s exploring all options for obtaining external funding. “Constructive discussions with a number of stakeholders are progressing,” a spokeswoman said. “Meanwhile the airline remains in a stable position.”

The transport department said its continuing to work closely with the sector and “willing to consider the situation of individual firms, so long as all other government schemes have been explored and all commercial options exhausted, including raising capital from existing investors.”

European airlines have tapped €32 billion (Dh132bn) in state loans, guarantees and equity to help them survive the coronavirus crisis. Britain has been more reluctant to splurge on aid than countries like France or Germany. Virgin’s long-haul focus adds to its peril, exposing it to markets that may take years to revive. The carrier has parked its fleet and said it will cut 3,150 jobs, while shutting its London Gatwick hub to reposition for a diminished market.

Government support – controversial given Mr Branson’s tax residence outside the UK – is pivotal to Virgin’s survival plan. The airline would need to revisit the private offers if the UK balks again at joining in on a rescue, one of the sources said. Restructuring specialist Alvarez & Marsal has been working on a so-called pre-packaged administration should no support be forthcoming, Bloomberg reported earlier.

Following an investor search led by Houlihan Lokey, Mr Weiss pitched his recovery plan to 12 parties including Deutsche Bank, Apollo Global, Cerberus Capital, Centerbridge Partners, Elliott, Davidson Kempner and Greybull Capital. He made further presentations to four remaining institutions last month.

The trans-Atlantic specialist’s turnaround plan is based on securing around £750 million (Dh3.5bn) to shore up liquidity.

Virgin Atlantic initially targeted about £250m in private or state-backed funding, together with the same amount in government guarantees for credit card receipts to free up payments being held back by merchant service providers that would otherwise be on the hook should the airline collapse.

Mr Branson is also set to contribute, having raised more than $400m (Dh1.5bn) to support his various companies by selling shares of space venture Virgin Galactic. Co-owner Delta Air Lines could defer some outstanding fees, sources have said.

The British Airline Pilots’ Association said separately following negotiations with the company that some 300 cockpit crew are likely to be made redundant in September. They’ll receive payoffs while going into a holding pool for potential return if plans permit.

Virgin said it’s also reached agreement with the Unite union, representing cabin crew, and has communicated the outcome of the impact on jobs to staff.