Virgin Atlantic seeks bankruptcy protection in the US
Richard Branson’s Virgin Atlantic airline has filed bankruptcy protection in New York while laying the foundation for a £1.2 billion restructure
Virgin Atlantic is not the only one of the Virgin Group's airlines to struggle during the downturn caused by the Covid-19 pandemic. Virgin Australia had filed for voluntary administration, a form of bankruptcy in Australia, in April.
London-based Virgin Atlantic, 49 per cent of which is owned by Delta Air Lines, flies exclusively long-haul international routes. It suspended all passenger operations in April and began flying again in July.
Chapter 15 is a form of bankruptcy designed for cases involving multiple countries, providing a mechanism for foreign-based companies undergoing bankruptcy proceedings in their own country to access the US court system. It effectively protects Virgin's US assets from creditors as the airline works to finalise a private rescue plan, which is being aided by the UK court system.
Virgin Atlantic had announced a £1.2 billion private rescue package in July but had not finalised the agreement. The airline had also appealed unsuccessfully for a bailout from the British government. Richard Branson, the Virgin Group founder, has offered his private island as collateral for a bailout or loan.
The airline said during a court hearing in London on Tuesday that it would effectively run out of cash in September, Bloomberg reported. Tuesday's US filing appeared to be linked to the London hearing, at which a judge gave the go-ahead for a meeting allowing creditors to vote on the restructuring plan.
A Virgin Atlantic spokesperson said: "In order to progress the private-only solvent recapitalisation of the airline, the restructuring plan is going through a court-sanctioned process under Part 26A of the Companies Act 2006, to secure approval from all relevant creditors before implementation.
"With support already secured from the majority of stakeholders, it’s expected that the restructuring plan and recapitalisation will come into effect in September. We remain confident in the plan."
Most companies in the tourism sector have been struggling over the last few months. Many have appealed to their governments for more support, including travel media outlet TTG in the UK. Whether they’ll achieve the outcomes they’re hoping for remains to be seen.