The deal, described as “a private-only solvent recapitalisation of the airline”, aims to protect Virgin Atlantic from entering administration.

The airline has launched a five-year restructuring plan that it says, once approved and implemented, will keep Virgin Atlantic flying.

With the support of shareholders Virgin Group and Delta, new private investors and existing creditors, the airline says the deal “paves the way for the airline to rebuild its balance sheet and return to profitability from 2022”.

The recapitalisation will deliver a refinancing package worth approximately £1.2bn over the next 18 months in addition to the self-help measures already taken. The plan includes cost savings of about £280m per year and about £880m rephasing and financing of aircraft deliveries over the next five years.

Branson will inject £200m of his own money, raised through selling off a stake in the space division Virgin Galactic. Virgin Group and Delta will defer payments owed totalling about £400m from the airlines’ transatlantic joint venture.

Davidson Kempner hedge fund will provide about £170m in loans. The new investors will have collateral but no shares in the airline, which remain 51% in the hands of Branson and 49% owned by the US carrier Delta.

To secure approval from all relevant creditors before implementation, the restructuring plan will need to go through a court-sanctioned process under part 26A of the Companies Act 2006.

It’s expected that the restructuring plan and recapitalisation will come into effect late Summer 2020.

The aviation industry has been one of the worst hit sectors during the pandemic. In Q2, flying fell by 98% and in the second half of 2020, capacity is expected to reduce by at least 60% compared to 2019, with pre-crisis levels of flying unlikely to return until 2023.

Virgin furloughed 80% of its employees at the outset and announced 3,550 job cuts in May.

Controversially, the airline asked the UK government for a £500m bailout, despite Branson being worth an estimated £3.8bn and registering the Virgin group in the tax haven of the British Virgin Islands.

Having closed its London Gatwick base, while retaining a slot portfolio at the airport to protect opportunities for future growth, leisure flying is now consolidated at London Heathrow and Manchester.

Virgin plans to restart passenger flying on 20 July and says it has “a vital role to play in supporting the UK economy as it recovers from the impact of the pandemic”.

Shai Weiss, CEO of Virgin Atlantic, said: “The solvent recapitalisation of Virgin Atlantic will ensure that we can continue to provide vital connectivity and competition to consumers and businesses in Britain and beyond. We greatly appreciate the support of our shareholders, creditors and new private investors and together, we will ensure that Virgin Atlantic can emerge a sustainably profitable airline, with a healthy balance sheet.

“Once our plan is approved, we will continue to focus on providing our customers with the service they have come to expect. Despite the incredible efforts of our teams, through cancelled flights and delayed refunds we have not lived up to the high standards we set ourselves, but we will do everything in our power to earn back their trust.”