Virgin Atlantic Airways has filed for bankruptcy for its U.S. operations as it attempts to implement a £ 1.2bn ($ 1.6bn) bailout announced in the month latest. It is the second of Richard Branson’s airlines to do so during the COVID-19 pandemic, after Virgin Australia filed for “administration” – a form of bankruptcy in countries like Australia and England – earlier this year.
Virgin Atlantic filed for Chapter 15 bankruptcy protection in the Southern District of New York on Tuesday. Chapter 15 is a way for foreign companies to let U.S. bankruptcy courts recognize ongoing overseas restructuring efforts. The company is not yet in the process of going out of business or going out of business, which is what Chapter 7 bankruptcy protection is for.
That said, Virgin Atlantic told a London court it would run out of cash next month if the bailout was not approved. In particular, Virgin Atlantic is trying to renegotiate leases on most of its aircraft as well as loans it has taken out in the past and cannot repay in full. Virgin Atlantic, which operates primarily in the UK, has administrative offices in Atlanta, Georgia, as well as a team in New York. (Virgin America, another Branson-run airline focused on the U.S. market, was purchased by Alaska Airlines in 2017.)
The company has an asset management firm waiting to loan it £ 170million ($ 222million) to stop the immediate financial bleeding as soon as the five-year plan gets approval from stakeholders and creditors. The remainder of the bailout’s value comes from shareholders, including £ 200million ($ 261million) from Branson’s largest Virgin Group, cost savings and possibly private investors. In court records, lawyers for Virgin Atlantic say the company already enjoys the plan’s support from “a substantial proportion of its stakeholders.”
“The ongoing COVID-19 pandemic has had a negative impact not only on [Virgin Atlantic], but the aviation industry as a whole, causing the virtual shutdown of the global passenger aviation industry, ”the company’s lawyers wrote in the case. ” While [Virgin Atlantic] has taken various measures to manage its liquidity in view of the unprecedented financial and operational conditions it faces, a more complete recapitalization is needed to secure the future of its business and ensure that it is able to cope with its commitments and its financing needs beyond mid-September 2020. ”