NEW YORK — Virgin Atlantic, the airline founded by British businessman Richard Branson, filed Tuesday for protection in U.S. bankruptcy court as it tries to survive the virus pandemic that is hammering the airline industry.
The airline made the Chapter 15 filing in U.S. federal bankruptcy court in New York after a proceeding in the United Kingdom.
A spokeswoman for Virgin Atlantic said the bankruptcy filing is part of a court process in the United Kingdom to carry out a restructuring plan that the airline announced last month. The process is supported by a majority of the airline’s creditors, and the company hopes to emerge from the process in September, she said.
OSLO (Reuters) – Norwegian Air <NAS.OL> could run out of cash by mid-May unless its proposed financial rescue plan is approved by creditors and shareholders, the budget carrier warned on Monday.
If approved by bondholders, leasing companies and shareholders, the plan may help Norwegian survive the coronavirus outbreak, which has grounded 95% of its fleet, leaving just 7 aircraft in operation.
But the planned debt-to-equity swap will hand majority ownership of 53.1% to the company’s lessors, while bondholders would own 41.7%, leaving current shareholders with just 5.2%, it said.
The move would allow Norwegian to tap government guarantees of 2.7 billion crowns ($255 million), which are dependent on the company reducing its ratio of debt to equity, and which would come on top of 300 million crowns it has already received.
It is “critical to get access to the state aid package by mid-May before the company runs out of cash,” Norwegian said in a presentation to investors.
Rapid growth has made Norwegian Europe’s third-largest low-cost airline and the biggest foreign carrier serving New York and other major U.S. cities, but with the expansion came debts and liabilities of close to $8 billion by the end of 2019.
Last week, the company reported that four Swedish and Danish subsidiaries had filed for bankruptcy and that it had ended staffing contracts in Europe and the United States, putting some 4,700 jobs at risk.
Norwegian’s shares opened 8% lower on Monday and are down 86% year-to-date.
The company aims to gradually emerge from the COVID-19 crisis with both a short-haul and long-haul network in place, and is targeting a return to normal operations in 2022, it said.
The plan requires backing from bondholders in each of four separate votes planned for April 30, from shareholders in an extraordinary general meeting scheduled for May 4, and from leasing firms.
It maintained plans to raise up to 400 million crowns in cash from owners.
(Editing by Jan Harvey)
FILE PHOTO: A Norwegian Air plane is refuelled at Oslo Gardermoen airport
OSLO (Reuters) – The shares of Norwegian Air plunged by more than 60% on Tuesday as they resumed trade after the airline proposed a financial rescue package on April 8 that would significantly dilute existing equity.
If approved by creditors and shareholders, the plan would convert $4.3 billion of debt into equity, and also raise some new equity, wiping out much of the remaining value of the company’s current shares.
The budget carrier has grounded most of its fleet due to the impact of the COVID-19 outbreak on travel and on March 16 announced the temporary layoff of 7,300 staff, about 90% of its workforce.
Norwegian’s shares plunged 62.5% in early trade to an all-time low of 3.10 crowns, valuing the company at just 500 million Norwegian crowns ($48.8 million).
Norwegian was facing financial problems even before the coronavirus outbreak. Before Tuesday’s fall, its shares were down 78% this year, underperforming other major European airlines, which were down between 30% and 60%.
The airline must now convince its creditors to agree to the rescue plan before it is put to a shareholders’ vote on May 4.
The Oslo stock exchange said on Tuesday that trading in Norwegian’s shares would be subject to special observation until there was further clarification of the airline’s situation.
Special observation is used under circumstances that may make the valuation of a security particularly uncertain, according to the market operator’s guidelines.
($1 = 10.2490 Norwegian crowns)
(Reporting by Terje Solsvik, editing by Gwladys Fouche/Victoria Klesty/Susan Fenton)
Passengers board a Norwegian Air plane in Kirkenes, Norway
SAO PAULO, May 9 (Reuters) – Brazilian airline Azul SA’s chief executive said on Thursday that its two larger competitors had barred the carrier from providing a competing air shuttle service on the highly profitable Sao Paulo to Rio de Janeiro route.
“Essentially what they did was they had a shutdown plan to keep us out,” CEO John Rodgerson told Reuters in an interview, referring to competitors Gol Linhas Aereas Inteligentes and LATAM Airlines Group.
The comments come weeks after Azul engineered a plan to break into the Sao Paulo-Rio de Janeiro route, by far the most transited in South America, but it fell apart after Gol and LATAM intervened.
The three airlines have been disputing the airport rights set to be left behind by their struggling competitor Avianca Brasil, which was scheduled to auction the routes this week as part of a bankruptcy process.
Azul, Brazil’s No. 3 airline, initially reached a deal with Avianca Brasil, but a few weeks later Gol and LATAM reached a different deal with Avianca Brasil’s key creditors, which was ultimately approved and sidelined Azul.
Both plans hinged on a successful Avianca Brasil bankruptcy auction, but the event was recently suspended indefinitely, meaning that even Gol and LATAM may not be able to get the airport rights they had agreed to buy.
“I don’t think they ever had the intention of closing on the deal,” Rodgerson said of Gol and LATAM’s agreement with Avianca Brasil.
Gol and LATAM have previously denied any anti-competitive stance.
Brazil’s antitrust regulator CADE said in April that it was concerned about a potential takeover by Brazil’s two major airlines, and that it preferred to see Azul or a new airline take over Avianca Brasil’s airport rights.
The rift also led Azul to leave Brazil’s airline industry group, known as ABEAR, late last month.
“I think the way they acted was inappropriate and not in the best interest of the industry,” Rodgerson said. “I don’t think we share the same values.”
Rodgerson gave the interview as part of Azul’s first quarter results announcement, in which higher operational costs weighed significantly, sending profits down 20% to 137.7 million reais ($35.06 million), despite significantly higher revenue compared to the same period last year.
While revenue grew 16% to 2.5 billion reais, personnel costs surged 37% amid continued expansion at the company, as well as the expiration of a payroll tax incentive.
“It’s kind of the new norm,” Rodgerson said.
Fuel costs also increased significantly, while other undisclosed costs jumped 34% to 224 million reais in the period.
Azul and its Brazilian competitors have faced higher costs in recent quarters due to the continued depreciation of the local currency, the real. While passengers buy their tickets in reais, many of the airline’s expenses, such as fuel, are denominated in the stronger U.S. dollar.
($1 = 3.9393 reais)
(Reporting by Marcelo Rochabrun; editing by Bernadette Baum and Bill Trott)
SAO PAULO, Jan 22 (Reuters) – Avianca Brasil, which filed for bankruptcy protection in December, is looking for a cash injection and has hired Brazilian consulting firm Galeazzi & Associados to help in talks with investors and creditors, the airline said.
Galeazzi’s executives are already visiting the carrier’s creditors to discuss options, a source said, asking for anonymity to disclose private talks. Reuters first reported the news of the Galeazzi hire, citing sources.
Avianca shareholders are discussing a potential cash injection with different investors, including hedge fund Elliott Management Corp, two sources said. Any investment now would need to happen within the bankruptcy protection process, likely in the form of debtor-in-possession financing.
Elliott and Galeazzi did not immediately reply to requests for comment.
Any capital injection or loan would need authorization from the bankruptcy judge.
Avianca is battling two of its main aircraft lessors, Aircastle Ltd and General Electric Co’s unit GE Capital Aviation Services, who have tried so far unsuccessfully to ground or repossess 40 percent of its fleet.
Avianca also said in the statement it continues to operate normally.
The escalating legal battle has added to the uncertainty surrounding Avianca Brasil’s ability to maintain its current flight schedule.
(Reporting by Tatiana Bautzer Editing by Susan Thomas and Alistair Bell)
