Virgin Atlantic uses Heathrow slots as collateral for $745m Apollo loan
Virgin Atlantic has borrowed $745m (£564m) from alternatives giant Apollo in a groundbreaking private credit deal that will see the airline use the value of its landing slots at Heathrow as collateral.
Virgin said it would use the funds to pay down a legacy debt and make upgrades worth hundreds of millions of pounds to its aircraft and cabins, including installing Starlink wifi on its planes.
Proceeds will also be used to refurbish the airline’s entire Boeing 787-9 fleet between now and 2028, including overhauled interiors and larger first class and premium economy cabins.
Shai Weiss, the airline’s chief executive, said the transaction “marks an important milestone” in the carrier’s attempts to shore up its balance sheet.
“We’re delighted to partner with Apollo on this transaction, and for their confidence in Virgin Atlantic, as we invest in delivering the best experience in the skies for our guests,” she added.
But in an unusual move to obtain the loan – which represents one of the largest private credit deals in UK aviation history – Virgin offered its highly sought-after take-off and landing slots at Heathrow as collateral.
Virgin loan one of several UK private credit deals for Apollo
An airport slot provides an airline with the right to operate at an airport over a particular period. At major aviation hubs they can often be valuable assets and are bought and sold by airlines for tens of millions of pounds.
At Heathrow, where limited runway space means demand for air travel considerably outstrips the amount of traffic the airport is able to facilitate, prime long-haul slots are among the most valuable in the world. Air France was reportedly able to offload a busy morning slot to Oman Air for $75m in 2016, with other contracts having fetched similar valuations.
Virgin secured its latest loan against 27 of its 31 landing slots at the west London hub, a decade after the airline became the first carrier to use its slots to raise capital.
The deal marks Apollo’s latest major foray into UK lending, just months after it committed £4.5bn to back the stuttering construction of the Hinkley Point C nuclear power station. The deal, which lent money to the megaproject’s main backer EDF Energy, was the largest sterling-denominated private credit transaction in history, and was followed a month later by an £80m loan to Nottingham Forest football club.
Partner Ben Eppley said: “We are pleased to partner with Virgin Atlantic on this transaction, which demonstrates our ability to provide bespoke scaled financing solutions to leading businesses.”