Virgin Atlantic files for bankruptcy as COVID-19 hits hard

According to a court filing in New York, one of the major British airlines, Virgin Atlantic has declared itself bankrupt and is seeking protection from US creditors.

Headquartered in London, Virgin Atlantic was founded by English business magnate, investor and philanthropist, Richard Branson.

The airline is seeking security under chapter 15 of the US bankruptcy code, which allows a foreign debtor to shield their assets in the country. The news comes just over a month after Virgin Atlantic revealed that it has secured financing that will enable them to survive for another 18 months.

Chapter 15 is a way for foreign firms to let the bankruptcy courts of the US know that restructuring attempts are taking place outside the country. But, Virgin Atlantic is not yet going out of business or liquidating its operations.

Virgin Atlantic operates only long haul international routes and was forced to suspend its flights in April due to the lockdown necessitated by the pandemic. The carrier, whose 51% is owned by Branson’s Virgin Group and 49% owned by US carrier Delta, cut more than 3,500 jobs to deal with the COVID-19 pandemic’s aftermath, which is mainly a slump in air travel demand.

Earlier, in April, Virgin Australia, the second-largest airline of the country, went into administration owing $6.8 billion to more than 12,000 creditors. Virgin Atlantic, is thus, the second airline from the Virgin group to do so.

The company has told a London court that if the rescue plan is not approved it will run out of cash next month. In particular, Virgin Atlantic is trying to renegotiate leases on most of its planes as well as loans it has taken in the past and can’t fully repay.

Earlier, Virgin Galactic, the group’s aerospace and space travel arm, revealed its plans to raise $460 million through a new share offering, and to postpone plans to send its billionaire founder Richard Branson into space due to a pandemic-driven shortage of manpower.