Virgin’s £1.2 billion rescue deal, what has changed?

In an earlier post, I looked at the likely make-up of a rumoured £900m rescue package for Virgin Atlantic. Today the airline announced that it has secured a deal, now said to be worth £1.2 billion. Other than the headline size of the package, what has changed?

According to reports, there is £200m of new equity from Richard Branson’s Virgin Group, in line with expectations. The other new money, loans from hedge fund Davidson Kempner, has reduced from the expected £250m to only £170m. So the new money component is actually £80m lower than previously rumoured.

Deferral of payments owed to Virgin Group and to Delta have increased from an expected £250m to £450m. It looks to me like they have added another year of deferred brand licence fees to Virgin and transatlantic JV payments to Delta. Other suppliers have apparently agreed to £450m of deferred payments too, up from an expected £200m.

Once again there is mention of credit card companies agreeing to ensure that bookings are not withheld from the airline. The figure previously mentioned that relates to this was £250m, suspiciously the same figure as the increase in the deferred payments from suppliers. Perhaps a coincidence, but if not then the “like for like” increase in the total size of the package may be only £120m.

In any event, the actual new money has reduced from an expected £450m to only £370m. More than all the increase in the package came in additional deferrals. So I still can’t see how this package will do anything more than defer the day of reckoning. Virgin Atlantic directors may have avoided the need to file immediately for insolvency and bought themselves some time, but this still looks to me like an airline that is running on fumes and is still a long way from any kind of safe place to land.