Virgin Atlantic has secured £200m in additional funding from parent company Virgin as the embattled carrier seeks a total of £1bn in the coming weeks in order to stay afloat.
The airline, which has seen its planes grounded for three months due to the coronavirus pandemic, has had its finances decimated by the virus and is set to cut a third of its workforce to survive the crisis.
The FT first reported that Virgin would provide an initial £200m, with an additional £400m in shareholder support due to be committed through deferrals and waivers.
The transatlantic flier, which was founded by Sir Richard Branson in 1984, is 51 per cent owned by the Virgin Group and 49 per cent owned by US airline Delta.
Industry sources confirmed that the deal would be structured so that the airline’s ownership structure would not be changed.
The funding is not the first time Branson has reached into his pockets to protect the carrier, after last month selling $500m in Virgin Galactic shares to prop up various wings of the Virgin empire.
In addition, a group of private investors are due to stump up £250m more to prop up the carrier, which is due to return to flying in July.
Hedge funds Davidson Kempner Capital Management and Elliott, as well as Centrebridge Partners, are involved in talks, the FT reported.
Up to £250m will be provided by credit card firms and lessors, who are currently witholding fees.
Virgin has set an informal deadline of early July for a potential funding agreement. Over the weekend a spokesperson told City A.M. the airline was “looking to wrap things up next week”.
The new financing arrangements do not involve any input from the government, with which Virgin Atlantic has been in frequent negotiations throughout the coronavirus period.
Virgin Atlantic’s proposal for a £500m package of commercial loans was rejected by the Treasury in April after failing to impress the government.
The airline is also yet to follow its rivals in the sector by using the Bank of England’s financing schemes to draw down extra funding.
A Virgin Atlantic spokesperson said: “Virgin Atlantic has been working on a comprehensive, solvent recapitalisation of the airline to ensure that we can continue to provide essential connectivity and competition to consumers and businesses in Britain and beyond.
“We greatly appreciate the support of our shareholders, creditors and private investors and by working together, we will ensure that Virgin Atlantic can emerge from the crisis a sustainably profitable airline, with a healthy balance sheet.”