Coronavirus: Crisis-hit Virgin Atlantic files for bankruptcy

Daniel Fowler
August 5, 2020

Virgin Atlantic, the airline founded by British businessman Richard Branson, filed Tuesday for relief from creditors as the virus pandemic hammers the airline industry.

The Virgin Group airline filed for Chapter 15 bankruptcy protection in the Southern District of NY on Tuesday. Advertisement In essence, Chapter 15 allows foreign individuals or companies to file for bankruptcy protection in the United States in cases where assets in more than one country are involved.

Virgin Atlantic had said during proceedings in the United Kingdom that it planned to apply for the USA protection while it finalizes a rescue plan that's already supported by a majority of its stakeholders.

An airline spokeswoman said the restructuring plan was before a British court "to secure approval from all relevant creditors before implementation".

Soon after it stopped flying in April, Virgin Atlantic said it would cut over 3,000 jobs and close its base at London's Gatwick airport, moving operations to Heathrow instead. If that happens, Virgin Atlantic would be forced to sell slots at Heathrow, forcing it to shut down completely.

Virgin Atlantic also appealed for a government bailout but was denied due to low credit ratings.

The airline unveiled a restructuring plan to secure its future, involving only private funds, last month.

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He said: "As a result of the Covid-19 pandemic, the group is now undergoing a liquidity crisis. The problems that the group now faces are not of its own making but are the result of a global health disaster".

However it marks the latest in a string of dire warnings for the airline, after Virgin Atlantic told a London court Tuesday it will run out of cash as soon as September unless a rescue deal is quickly approved.

Often, Chapter 15 is filed in conjunction with "a primary proceeding brought in another country, typically the debtor's home country", according to the US Court website. Like many other airlines around the world, Virgin Atlantic suffered from the ongoing crisis.

At the hearing, Mr Allison asked Mr Justice Trower to make an order allowing meetings of groups of creditors to be convened to enable them to vote on the restructuring plan.

Delta said it supported the plan and was "optimistic" that it would help Virgin Atlantic "maintain its position" in the travel market.

It can be recalled that Virgin Atlantic, who have been heavily impacted by the coronavirus pandemic had put in some measures to ensure the future of the airline is safeguarded.

The following month it was bought by Bain Capital, which said it supported the airline's current management team and its turnaround plan for the business.

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