Virgin Australia will raise $852 million and slash costs as part of a new plan to cut its debt load and improve earnings. Its shares fell 12 per cent in early trading as the market digested the deeply discounted rights issue .
The equity raising will be supported by shareholders Singapore Airlines, Nanshan Group, HNA and Richard Branson's Virgin Group, although shareholder Etihad Airways has yet to commit to taking up its rights under the offer, Virgin said on Wednesday. 
Chief executive John Borghetti said Etihad was "still going through their internal processes and we haven't received the outcome of their processes as yet.
"Obviously they need to talk to their board," he told reporters. "They are evaluating it and going through their normal processes.
"I'm not concerned because the $852 million is underwritten."
About $425 million of the capital raised will be used to repay funds loaned to Virgin in   March by its shareholders, with the rest to be used to strengthen Virgin's balance sheet by cutting next debt which currently stands at around $2 billion. 
The equity raising will be priced at 21&cent; a share. Virgin shares closed on Tuesday at 30&cent;. and fell to 26 cent s on Wednesday - 11.9 per cent down.
The cost-cutting drive is expected to result in some job losses. But the biggest impact for Virgin will come from a massive fall in its interest costs and a potential re-rating from credit rating agencies.
The announcement comes just weeks after Virgin raised $159 million by selling a 19.9 per cent stake in the business to private Chinese airline operator HNA Group.
Last week another Chinese conglomerate, Nanshan Group, purchased Air New Zealand's 19.9 per cent stake in Virgin. 
Singapore, HNA, Nanshan and Virgin Group have also committed to contribute to the sub-underwriting of entitlements not taken up by other shareholders.
UBS, which has advised Virgin on the capital raising, is the sole underwriter on the capital raising.
Virgin also plans to rationalise its fleet of aircraft to cut costs over the next three years, and will also cut costs across maintenance and engineering, procurement and supply chain functions and staffing.
Virgin is targeting net free cash flow savings of $300 million by the end of the 2019 financial year but expects the restructure program will incur cash costs of $200 million - $250 million, plus non-cash balance sheet impairments of $150 million-$200 million in the three years to   June 30, 2019.
Mr Borghetti said Virgin's "renewed" capital structure "will strengthen our balance sheet, provide additional liquidity and help fund initiatives to improve earnings and cash flow. Additionally, the new program of operational and capital efficiency initiatives will further deepen our focus to having a low, sustainable cost base."
Mr Borghetti admitted that "there will be positions that will become redundant", however he did not suggest large-scale job losses.
Virgin Australia will get rid of as many as six of its 14 ATR aircraft and all 13 of its Embraer E190 fleet over the next three years, it said. The streamlining of aircraft will allow savings to be captured on sourcing and maintenance and ground operations.
Mr Borghetti did not change the current estimates for profit for the 2016 full year to come in at between $30 million and $60 million. However, analysts will be counting on the fresh equity and reduced interest costs and other savings to lead to higher profits from 2017.