Troubled airline Virgin Atlantic has finalised a rescue deal worth GBP 1.2 billion that should protect thousands of jobs. Sir Richard Branson's Virgin Group will inject GBP 200 million, with additional funds provided by investors and creditors.

The billionaire Virgin boss had a request for government money rejected, leaving the airline in a race against time to secure new investment, reports Theo Leggett in BBC News.

Virgin Atlantic is cutting 3,500 staff, but the airline said the remaining 6,500 jobs should be secure.

The deal includes funding from US hedge fund Davidson Kempner Capital Management, and the postponement of about GBP 450 million in payments to creditors. Virgin Group owns 51% of the airline, with the rest held by US carrier Delta Air Lines.

Virgin Atlantic said the refinancing covered the next five years and paved the way for it to rebuild its balance sheet and return to profitability in 2022.

"We have taken painful measures, but we have accomplished what many thought impossible," said Shai Weiss, Chief Executive. "The last six months have been the toughest we have faced in our 36-year history."

As with other airlines, the Covid-19 outbreak plunged Virgin Atlantic into a crisis as air travel dried up. Virgin grounded most of its fleet for months, but is due to resume some services next week.

The company had initially hoped the government would step in with up to £500m in bailout loans, but ministers made it clear taxpayers' money could only be considered once all other options had been exhausted.

Sir Richard even offered to mortgage his Caribbean holiday island, Necker, in return for new investment, although this was no longer necessary. Virgin Group raised money for the investment from the sale of some shares in the Virgin Galactic space tourism company.

The investment plan still needs formal approval from Virgin Atlantic's creditors under a court-sanctioned process.

In May, the airline announced 3,500 job cuts and the closure of its base at Gatwick airport. Although the restructuring and investment plans protect the remaining jobs, it does not change the need to re-shape the size of the business, Virgin Atlantic said.

There is some new money here - an extra £200m in cash from the Virgin Group and loans worth GBP 170m from Davidson Kempner. But a large part of the package is made up of deferring or waiving existing liabilities.

This was probably the best the company could do in the circumstances, after the government made it clear targeted state aid would only be considered as a last resort, after private-sector options had been exhausted.