Virgin Atlantic Files For Bankruptcy In The United States

Virgin Atlantic To Quit Gatwick Base Prompting Over 3,000 Job Cuts
Virgin Atlantic Files For Bankruptcy In The US. Photo: Virgin Atlantic

Virgin Atlantic has filed for Chapter 15 bankruptcy protection in southern district of New York on Tuesday. The UK based airline is seeking protection from creditors in the United States.

Chapter 15 bankruptcy allows a foreign debtor to shield assets in this country, according to a court filing on Tuesday. Chapter 15 bankruptcy is for bankruptcy cases in which debtors, assets, and other aspects are spread across multiple countries.

The bankruptcy announcement comes just after more than a month after Virgin Atlantic announced it had secured a £1.2 billion ($1.57 billion) private rescue package to survive for another 18 months. The airline had also appealed for a bailout from the British government. However, it was not successful. 

Virgin Group founder offered his private island for a bailout or loan. Photo: Shutterstock

The Virgin Group founder, Richard Branson has even offered his private island as collateral for a bailout or loan. Virgin Australia, also went into administration back in April, owing $6.8bn to more than 12,000 creditors.

Virgin Atlantic has now become billionaire Branson's second airline to file for Chapter 15 bankruptcy in the U.S. this year as the industry continues to be severely affected by the widespread coronavirus pandemic.

Regarding the Chapter 15 filing, a Virgin Atlantic spokesperson told:

"Virgin Atlantic attended court today as part of a solvent recapitalization process under 26(A) of the UK Companies Act 2006. That process is proceeding with the support of the majority of our creditors. Following the UK hearing held earlier today, ancillary proceedings in support of the solvent recapitalization were also filed in the US under their Chapter 15 process."

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Virgin Atlantic have long haul twin-jets only. Photo: Virgin Atlantic

"These ancillary US proceedings have been commenced under provisions that allow US courts to recognize foreign restructuring processes. In the case of Virgin Atlantic, the process we have asked to be recognized is a solvent restructuring of an English company under Part 26A of the English Companies Act 2006."

Virgin Atlantic flies only long-haul international routes to key destinations and the carrier suspended flights in April due to the coronavirus pandemic.

Bloomberg reported Virgin Atlantic told the high court it could run out of money in September if a restructuring deal is not approved.

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49% of the airlines is owned by Delta Airlines. Photo: Airbus

Virgin Atlantic is owned by the Virgin Group and Delta Airlines. 51% of the airlines is owned by Branson’s Virgin Group and 49% by Delta Airlines.

The airline closed its Gatwick base and cut more than 3,500 jobs to somehow withstand with the fallout from the Covid-19 pandemic, which has grounded planes and largely affected air travel.

Virgin Atlantic announced a recapitalization plan back in July. The five-year business plan would see the airline rebuild its balance sheet and assist it return back to profitability from 2022. 

Virgin Atlantic To Quit Gatwick Base Prompting Over 3,000 Job Cuts
Virgin Atlantic will not sale its slots at Gatwick. Photo: Boeing

On the progress of that 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."

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Delta CEO said that Delta would not offer a cash injection. Photo: Airbus

Atlanta-based Delta Air Lines has been supporting Virgin Atlantic’s process. "Delta said it supported the plan and was 'optimistic' that it would help Virgin Atlantic 'maintain its position' in the travel market.

However, Delta CEO Ed Bastian has already said that Delta would not offer a cash injection to save Virgin from a bankruptcy restructuring after the corona virus outbreak.

The high-profile billionaire Richard Branson had attracted criticism after calling for government help for Virgin Atlantic to survive the downturn.

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