A U.K. court has signed off on Virgin Atlantic’s restructuring plan, paving the way for the troubled carrier to “emerge from the Covid-19 crisis a sustainably profitable airline.”
The £1.2 billion ($1.6 billion) plan gives Virgin Atlantic breathing room for 18 months to restructure its operations. The carrier plans to realize £280 million in annual costs savings and to reduce its fleet capital expenditure by £880 million over the next five years. The carrier also announced today that it is cutting another 1,150 jobs and will provide the option for 600 cabin-crew employees to take voluntary separation packages.
The restructuring plan includes £600 million from Delta Air Lines, which owns a 49% stake in the carrier, and Virgin Atlantic’s other shareholders. “Together, we have achieved what many thought impossible and that is down to the efforts and sacrifices of so many across the company,” CEO Shai Weiss said in a statement. “The completion of the private-only, solvent recapitalization of Virgin Atlantic removes much of the uncertainty we faced and represents a major step forward in our fight for survival.”
Virgin Atlantic began the restructuring process in the U.K. earlier this year, and filed for bankruptcy protection in the U.S. under Chapter 15 of the U.S. Bankruptcy Code, which gives legal protection to a foreign company’s U.S. assets while it restructures in its home country.
Virgin Atlantic’s woes precede Covid-19, but the pandemic forced it into an existential crisis. The carrier announced a bold restructuring plan, which involved laying off thousands of workers and ending operations at London Gatwick, which had previously been one of its most important airports. The airline also retired its fleet of Boeing 747-400s and dropped several underperforming routes.
The restructuring plan buys it time, but its survival hinges on the recovery of its most important market: the transatlantic routes to New York and the Caribbean. The recovery of those routes will entail the easing of government-imposed travel restrictions, and it remains unclear when that might happen. International air travel not expected to recover until 2024, but IATA has reported some signs of life on leisure routes over the summer.