Virgin Atlantic confirmed it had secured refinancing package worth £1.2 billion and declared the recapitalisation “a big step forward” in securing the airline’s future.

The Virgin Atlantic rescue will involve a court-backed restructuring plan that “once approved and implemented will keep Virgin Atlantic flying”.

The restructuring is based on a five-year business plan which envisages the carrier returning to profitability from 2022.

The refinancing includes cost savings of about £280 million a year and £880 million in re-phasing and financing of aircraft deliveries over the next five years.

In a statement, Virgin Atlantic said shareholders Virgin Group, which owns 51% of the carrier, and Delta (49%) will provide £600 million in support, including a £200 million investment by Virgin Group and £400 million in shareholder deferrals and waivers of payments.

US hedge fund Davidson Kempner Capital Management will provide £170 million in financing.

The airline’s creditors “will support the airline with over £450 million of deferrals”.

And Virgin Atlantic said: “The airline continues to have the support of credit card acquirers (Merchant Service Providers) Lloyd’s Cardnet and First Data.”

The deal with creditors will make use of a new court-sanctioned restructuring process in the UK.

The Corporate Insolvency and Governance Act, which came into force on June 25, offers protection from creditors during a company restructure.

The draft bill was amended to remove protections for aircraft lessors which might have seen some of Virgin Atlantic’s aircraft recovered by leasing companies.

Davidson Kempner will not take a stake in the carrier but has secured its loan against Virgin Atlantic assets including its landing slots at Heathrow, against which the airline secured an earlier loan in 2015.

The hedge fund is a specialist in “distressed investments” according to its website.

The restructuring plan and recapitalisation are expected to come into effect by “late summer”.

The deal is worth considerably more than the £500 million the carrier needed in April and May when it sought a government loan and credit facility.

Virgin Atlantic chief executive Shai Weiss said: “Few could have predicted the scale of the Covid-19 crisis. The last six months have been the toughest we have faced in our 36-year history.

“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.”

Weiss has reportedly drawn up a plan to refocus options on the Caribbean and Israel until the US re-opens to international traffic.

The carrier is in the process of cutting 3,150 jobs, about one third of the total, having shut down its operation at Gatwick.

It is due to resume operations from Heathrow to Hong Kong from July 20 and to New York and Los Angeles from July 21. However, quarantine restrictions remain in place on arrivals to the UK from all three cities, as they do on all US destinations – the mainstay of Virgin Atlantic’s network.

Analysts have cast doubt on Virgin’s ability to return to profit given the carrier failed to make a profit through most of the last decade, including in 2017-19 when leading airlines in Europe and the US reported record results.