Virgin Atlantic, the airline owned by British billionaire, Richard Branson has filed for Chapter 15 bankruptcy in the US
According to a report in the Daily Mail, it is the second of his airlines to do so this year as the industry continues to be ravaged by the coronavirus pandemic.
Virgin Australia had also filed for bankruptcy back in April, in both the US and in Australia.
In June 2005, and with a 49 per cent minority stake, Branson launched Virgin Nigeria only to completely pull out three years later.
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Virgin Atlantic’s filing on Tuesday in US bankruptcy court in the Southern District of New York said it had negotiated a deal with stakeholders ‘for a consensual recapitalization’ that will get debt off its balance sheet and ‘immediately position it for sustainable long-term growth’.
The US filing is in addition to a proceeding filed in a British court, where Virgin Atlantic obtained approval Tuesday to convene meetings of affected creditors to vote on the plan on August 25.
A Virgin Atlantic spokesperson said that the company was pursuing a ‘solvent restructuring’ under British law. The filing means the airline is not yet going into liquidation or going out of business – but the company warned that if a deal with creditors isn’t reached, it could run out of cash by September.
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The company’s filing comes just a day after Branson announced he could launch into space aboard his Virgin Galactic aircraft as its first passenger early 2021, potentially blazing a path for commercial flights.
Virgin Australia said on Wednesday it would make permanent cuts to one-third of its workforce and focus on being a short-haul operator as part of a new business plan under the ownership of Bain Capital.
The country’s second-biggest airline had entered voluntary administration in April owing nearly A$7bn to creditors, having been unprofitable for seven consecutive years before the coronavirus pandemic hit.
Virgin said 3,000 of its 9,000 staff would be affected by the cuts
Chapter 15 of the US bankruptcy code allows foreign debtors to apply for protection of their assets in America from US creditors.
A Chapter 15 filing is typically accompanied by a bankruptcy or equivalent filing in a company’s home country.
The law allows cooperation between the United States courts and the foreign courts, as well as other authorities of foreign countries involved in cross-border insolvency cases
Airlines have been some of the hardest hit by the pandemic as borders shuttered and travel bans issued when nations went into lockdown earlier this year.
Virgin Atlantic, which is based in London and 49 per cent owned by Delta Air Lines, was forced to ground all passenger operations back in April.
The airline took its planes to the skies once more in July but, as travel restrictions continue and consumer confidence is low, it has failed to draw the crowds back in.
‘The ongoing COVID-19 pandemic has had an adverse impact on not only [Virgin Atlantic], but the aviation industry as a whole, occasioning the near shutdown of the global passenger aviation industry,’ the company’s lawyers wrote in Tuesday’s filing.
‘While [Virgin Atlantic] has taken various measures to manage its liquidity in light of the unprecedented financial and operating conditions it faces, a more comprehensive recapitalization is necessary to secure the future of its business and ensure that it is able to meet its liabilities and funding requirements beyond mid-September 2020.’
Chapter 15 is a form of bankruptcy protection for companies that span multiple countries, providing a way for foreign businesses to protect US assets from creditors.