Virgin Atlantic Gets $1.5 Billion Lifeline to Prevent Bankruptcy -- WSJ
By Alistair MacDonald and Benjamin Katz
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 15, 2020).
LONDON -- Richard Branson's Virgin Atlantic Airways said it
secured a financial package worth about $1.5 billion that will
allow it to stave off bankruptcy and provide some breathing room
for the British billionaire's broader effort to stabilize a travel
and tourism empire hit hard by the pandemic.
Mr. Branson's Virgin Group will invest GBP200 million ($250
million) in the U.K.-based airline, a popular option for
trans-Atlantic flights. U.S.-based Davidson Kempner Capital
Management LP, meanwhile, is providing GBP170 million ($213
million) in secured loans. The deal is contingent on the airline
making savings through deferrals of fees and advances from payments
companies and aircraft lessors. The company will also push back
orders of new Airbus SE aircraft, it said.
Virgin Group will retain its 51% controlling stake in the
airline, and its U.S. partner Delta Air Lines Inc. will continue to
hold the remaining 49%. Both companies are deferring fees on things
like using Virgin's brand name and Delta's booking system, Virgin
In recent years, Mr. Branson had taken a back seat in a
50-year-old business he built through a constant churn of new
investments in industries like airlines, banks, gyms and hotels. He
assumed a big role in setting up, running and promoting many of
them -- often through high-profile stunts. He once arrived in
Manhattan's Times Square in a tank to advertise a new cola brand.
More recently, though, Mr. Branson has acted more like an investor
in these businesses than its manager, according to people who work
He is now at the center of the financial difficulties the
pandemic has unleashed. Many of his biggest investments are geared
toward travel and leisure, industries particularly hard hit by the
crisis. Mr. Branson's Virgin Voyages cruise line had just taken
delivery of its first vessel when the pandemic brought that
industry to a halt.
Virgin Voyages has another three cruise ships for which it has
signed binding contracts for delivery over the next three years, at
a cost of around EUR2 billion ($2.17 billion), according to news
releases the company issued last year. The effort is a joint
venture with U.S. private-equity firm Bain Capital. Virgin Hotels,
meanwhile, was set to open three new U.S. properties this year --
in Nashville, New York and Las Vegas -- and a further two the year
The Virgin Group generates around $150 million a year in
revenue, according to a person familiar with its business. In the
last five years, it has also made around $1.5 billion by selling
assets to reinvest in businesses like Virgin Voyages and two
space-linked enterprises, this person said.
Mr. Branson has been dealing with the crisis from the British
Virgin Islands, where he owns the island of Necker. Early in the
pandemic, he said he was considering borrowing against the island
to help bolster his other businesses.
In May, Virgin Group sold over 10% of Virgin Galactic Holdings
Inc., the space tourism venture that recently started trading in
New York. Part of those proceeds are going into Virgin
Despite the lifeline, Virgin Atlantic still faces big hurdles.
Airlines across the globe have retrenched dramatically as air
travel has come to a near-standstill. They have furloughed or let
go hundreds of thousands of staff, deferred or canceled new
aircraft orders and grounded flights, drying up revenue.
Unlike in the rest of Europe, where the likes of Deutsche
Lufthansa AG and Air France-KLM have received billions of dollars
worth of loans from local governments, the U.K. opted to forgo an
aviation-specific bailout strategy. That led Virgin Atlantic to
undertake a monthslong search for external funding to keep its
"Undoubtedly, the last six months have been the toughest we have
faced in our 36-year history," said Shai Weiss, Virgin Atlantic's
chief executive, in a statement.
Virgin Atlantic was poised this year to turn its first profit
since 2016 until the coronavirus struck, cutting flights by 98% in
the second quarter and forcing the airline to lay off 3,550
workers. The airline said in its statement that it expects capacity
to be reduced by 60% in the second half of 2020 from the year
before and predicts precrisis levels of flying won't return until
Last month, Bain Capital agreed to buy Virgin Atlantic's
insolvent sister airline Virgin Australia Holdings Ltd., charting a
future involving fewer and smaller planes and mirroring strategies
adopted by other carriers, including in the U.S.
Write to Alistair MacDonald at email@example.com and
Benjamin Katz at firstname.lastname@example.org
(END) Dow Jones Newswires
July 15, 2020 02:47 ET (06:47 GMT)
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