Virgin Atlantic airline files for U.S. bankruptcy protection
Virgin Atlantic, the airline founded by British businessman Richard Branson, filed Tuesday for protection in U.S. Bankruptcy Court as it tries to survive the virus pandemic that is hammering the airline industry.
The airline made the Chapter 15 filing in federal bankruptcy court in New York after a proceeding in the United Kingdom.
A spokeswoman for Virgin Atlantic said the bankruptcy filing is part of a court process in the United Kingdom to carry out a restructuring plan that the airline announced last month. The process is supported by a majority of the airline’s creditors, and the company hopes to emerge from the process in September, she said.
A Virgin Atlantic lawyer said in a court filing that the company needs an order from a U.S. court to make terms of the restructuring apply in the U.S.
The airline is primarily a long-haul operator, including flights between the U.K. and the U.S. It stopped flying in April due to the pandemic and only resumed flights in July. It closed a base at London’s Gatwick Airport and cut about 3,500 jobs.
Branson appealed to the British government for financial help this year — even saying that he would pledge his Caribbean island resort as collateral for a loan — but was rebuffed.
Last month, Virgin Atlantic announced that it had put together a deal to raise nearly $1.6 billion from private sources, including about $260 million from Branson’s Virgin Group.
Atlanta-based Delta Air Lines, which owns 49% of the airline, agreed to defer payments it was owed, and hedge fund Davidson Kempner agreed to lend Virgin Atlantic about $220 million. Virgin Atlantic also delayed deliveries of Airbus jets.
Virgin Atlantic’s court moves follow bankruptcy filings in the U.S. by Latin America’s two biggest airlines, Latam and Avianca, as well as by Mexico’s Aeromexico, since the start of the pandemic. Virgin sister airline Virgin Australia filed for protection from creditors in its home country in April.
Airlines have been slammed by the coronavirus pandemic, which has led to travel restrictions and left many people afraid to fly. The International Air Transport Assn., a trade group for global airlines, estimates that the industry will lose $84 billion this year and that revenue will drop by half from 2019 levels.
Branson founded and still holds a 10% stake in Virgin Australia, which has announced plans to shed one-third of its workforce as it scales back operations as part of its restructuring.
The airline, Australia’s second-largest carrier, sought bankruptcy protection, and its administrator, Deloitte’s, has entered into a binding agreement to sell the airline to Boston-based investment firm Bain Capital. The deal will go within weeks for final approval to a meeting of Virgin creditors who are owed about $5 billion.