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Virgin Atlantic sells Dreamliners to aid post-COVID recovery bid

Sir Richard Branson’s Virgin Atlantic Airways is selling two of its newest aircraft to raise tens of millions of pounds that will help it to navigate through the bleakest winter in the recent history of commercial aviation.

Sky News has learnt that the carrier, which concluded a £1.2bn rescue deal during the summer, is to receive a “cash enhancement” of up to £70m by selling and leasing back a pair of Boeing 787 Dreamliners.

The deal, which was confirmed by the airline following an enquiry from Sky News on Tuesday evening, is with Griffin Global Asset Management, an aircraft lessor operated with the backing of buyout firm Bain Capital.

A Virgin Atlantic aircraft
Image: Virgin Atlantic has secured a £1.2bn rescue and shed thousands of jobs in the wake of coronavirus disruption

It is the latest example of a transaction involving Bain and parts of Sir Richard’s Virgin empire.

In the autumn, the private equity giant took control of Virgin Australia following a financial restructuring, while it is also a shareholder in Virgin Voyages, Sir Richard’s delayed ocean cruises venture.

Insiders said the Dreamliners sale-and-leaseback would generate additional liquidity for Virgin Atlantic, which has been encouraged by the performance of its cargo operations during the pandemic, and by customer demand during a recent Black Friday sale.

A number of airlines, including easyJet, have attempted to alleviate balance sheet crises by selling aircraft with their fleets virtually grounded for much of this year.

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The discovery of a COVID-19 vaccine has given the aviation industry fresh hope that a return to normality will arrive within a couple of years, although many industry executives have predicted that pre-coronavirus levels of demand may not be seen again until 2024.

Sources said the proceeds from the sale-and-leaseback would also be used to pay down some of the debt taken on by Virgin Atlantic as part of its solvent recapitalisation.

EasyJet lowcost airline aircrafts with their engines covered with plastic protection, remain on the tarmac of the Humberto Delgado airport in Lisbon on April 9, 2020. - Portuguese government decided to suspend all flights from April 9 to 13 to prevent the spread of the coronavirus COVID-19 outbreak. (Photo by PATRICIA DE MELO MOREIRA / AFP) (Photo by PATRICIA DE MELO MOREIRA/AFP via Getty Images)
Image: EasyJet is among airlines to have completed sale and leaseback deals on aircraft

Under that deal, Davidson Kempner Capital Management, a US hedge fund, lent £170m to the company – a chunk of which will now be repaid.

In a statement, a Virgin Atlantic spokesperson said: “On 4 September, Virgin Atlantic completed the privately funded, solvent recapitalisation of the airline to ensure that we continue to provide essential connectivity and competition to customers in the UK and beyond.

“We continue to explore financing opportunities to strengthen our balance sheet, as already provided for in the recapitalisation.

“This financing opportunity, regarding two of our 787s, allows us to pay down debt and improve our cash position going into 2021.

“Passenger and cargo flying continued throughout November and following our Black Friday sale, we have seen encouraging demand for travel at Christmas, Easter and Summer next year.

“We are confident that Virgin Atlantic will emerge from the COVID-19 crisis a sustainably profitable airline, with a healthy balance sheet.”

Sir Richard’s airline has cut close to half its workforce since the start of the pandemic, with more than 3000 jobs being axed in the early stages of the crisis and a further 1,150 jobs in September.

Aviation executives have bemoaned the lack of government support for the industry, both financially and in the form of a rapid-testing regime to restore confidence in international air travel.

In total, Virgin Atlantic’s rescue deal was worth £1.2bn, with Sir Richard’s Virgin Group injecting £200m, as well as £400m of shareholder deferrals and waivers.

Other creditors have agreed to defer £450m owed to them, while credit card acquirers including Lloyds Cardnet and American Express reduced the sums they typically seek as collateral.

Sir Richard has retained majority ownership of Virgin Atlantic, with Delta Air Lines holding the remaining stake.

In an attempt to bolster customer demand, Virgin Atlantic has begun offering free insurance to customers for flights operating until the end of March 2021, protecting them against the risk that they become ill with COVID-19.

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