Richard Branson's Virgin Atlantic closes in on $1.6 billion rescue plan

The airline has had to close its base at London's Gatwick Airport and cut more than 3,500 jobs

LONDON - Virgin Atlantic's creditors will vote on a 1.2 billion pound ($1.6 billion) rescue plan on Tuesday in a crucial test of the airline's ability to survive in an industry devastated by the COVID-19 pandemic.

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Virgin Atlantic agreed on the deal with shareholders and creditors in July to secure its future beyond the coronavirus crisis.

The airline, which is 51% owned by Richard Branson's Virgin Group and 49% by U.S. airline Delta, said it remains confident in the restructuring plan and is on track to finalize its solvent recapitalization in the first week of September.

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Tuesday's vote of affected trade creditors includes nearly 200 suppliers that the airline owes more than 50,000 pounds to. It needs 75% support of the overall outstanding value of money owed at a hearing at London's High Court.

Sir Richard Branson poses at the 2012 MusiCares Person of the Year tribute honoring Paul McCartney in Los Angeles, February 10, 2012. REUTERS/Danny Moloshok (UNITED STATES - Tags: ENTERTAINMENT) - RTR2XMZM

If successful, another UK court hearing will be held on Sept. 2 to approve the plan, and a procedural hearing is scheduled for Sept 3 in the United States.

Should the creditors fail to support the plan, the judge can still rule that it is in their interests for it to go ahead.

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Virgin Atlantic has had to close its base at London's Gatwick Airport and cut more than 3,500 jobs to contend with the fallout from the COVID-19 pandemic, which has grounded planes and hammered demand for air travel.

Global airline body IATA has said that the industry will not return to pre-crisis levels until 2024.

Although the likes of Germany and the United States have given bailouts to major carriers, Virgin Atlantic agreed a private-only restructuring deal after Britain said state support would only be considered after all other avenues had been exhausted.

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