Virgin Atlantic Rescue Plan On Track, Your Miles Are Safe

Virgin Atlantic has raised $525 million in cash via three new loans, and creditors have agreed to take a hair cut. 42.5% comes from a hedge fund, 50% of the loan comes from Virgin Group, and the remaining 7.5% from a new loan against an aircraft engine.

Delta and Virgin Group get preferred stock as a swap against payments they’re owed by the airline. And the airline is reducing its aircraft lease obligations.

All of this was agreed to prior to today – with the whole deal waiting on a $13 million haircut the airline wanted its suppliers to take, along with spreading out payments still due in quarterly installments for two years. That’s now been agreed to. >A court is expected to approve the deal September 2.

As a result, there’s no longer immediate risk of insolvency. The airline reduces its expenses and has some additional cash to work with, though with higher interest obligations going forward – and a need for travel to recover, because there may not be much additional wood to burn if they find they need additional funding.


Copyright: boarding1now / 123RF Stock Photo

Virgin Atlantic’s restructuring no longer poses a threat to Virgin miles. The miles were always going to retain their value as long as the airline remained in operation and that’s happening – although the carrier remains vulnerable. It retains a privileged position at London’s Heathrow airport, but travel demand has to return for that position to be valuable again.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. So the loan against a single aircraft engine is $39M+? That value seems very high for a single engine. Maybe the loan is secured against multiple engines?

  2. Whew! Spent a number of years collecting close to 700k miles. Almost makes me sick to think how close they were to being completely worthless.

  3. I’m close to Dan’s number. It’s a relief that they have stayed in business, not just because of miles but my frequent route is IADLHR and having just the choice of BA and UA would not be something to embrace with happiness and joy.
    It’s a shame they are not restarting IAD until late October though.

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