Creditors of Virgin Atlantic on Tuesday voted to support a £1.2bn ($1.6bn) rescue package designed to stave off a collapse of the airline as a result of the coronavirus pandemic.
The plan received the “overwhelming support” of all four of the airline’s creditor classes, Virgin Atlantic said in a statement.
Around 170 of Virgin Atlantic’s creditors had been asked to accept a 20% reduction in the money that they are owed.
The seal of approval from creditors is “a significant milestone,” the airline said, noting that the overall plan must still be approved by the High Court on 2 September.
The airline has stated that it could collapse into administration if the package is not sanctioned by the court, warning that it could “run out of money altogether” by the end of September.
The package comes as part of a major financial restructuring scheme known as a solvent recapitalisation plan, which will involve an injection of funds and significant debt reductions for the airline.
As part of the deal, shareholders will provide around £600m in support, which includes a £200m investment from Richard Branson’s Virgin Group, which owns 51% of the airline.
Investment management firm Davidson Kempner Capital is also providing £170m of secured financing, while creditors on Tuesday approved more than £450m in payment deferrals.
Virgin Atlantic has also applied for bankruptcy protection in New York. A hearing on that matter will take place on 3 September, a day after the UK High Court ruling.
Virgin Atlantic has taken drastic steps to secure its future in recent months, introducing pay cuts and recruitment freezes across the airline.
Most significantly, it was forced to slash 3,500 jobs and to close its base at London’s Gatwick Airport.
The vote comes as the aviation industry confronts an unprecedented crisis in coronavirus.
On Monday, Virgin Atlantic said it would introduce a free insurance policy for all new and existing flight bookings, pledging to cover up to £3,000 in expenses if a customer is denied boarding or has to quarantine due to a potential coronavirus infection.
The move underlines the extent to which airlines are trying to coax customers to make bookings.
New analysis suggests that 85% of all airline routes across the world face some kind of travel restrictions.
And 93% of routes in the highly industrialised G20 countries are subject to restrictions, according to a note from Swiss financial services firm UBS.
The new Virgin Atlantic insurance policy will apply to all bookings up until 31 March 2021, and will also offer comprehensive cover if a customer or travel companion becomes ill with coronavirus.