BREAKING: Virgin Atlantic becomes billionaire Richard Branson’s second airline to file for bankruptcy as industry continues to be ravaged by the pandemic
- Virgin Atlantic filed for Chapter 15 bankruptcy in New York on Tuesday
- The company earlier Tuesday told a London court it will be forced to fold if a rescue deal isn’t reached by next month
- Virgin Atlantic is the second airline in the Virgin Group to file for bankruptcy this year after Virgin Australia filed for voluntary administration in April
- The airline industry has been devastated by the pandemic as travel bans and border closures forced carriers to ground planes
Virgin Atlantic has become billionaire Richard Branson’s second airline to file for bankruptcy this year as the industry continues to be ravaged by the coronavirus pandemic.
The Virgin Group airline filed for Chapter 15 bankruptcy protection in the Southern District of New York on Tuesday, just hours after the company told a London court it will be forced to fold if a rescue deal isn’t reached by next month.
This marks yet another blow for Branson’s Virgin brand, coming just months after sister airline Virgin Australia filed for voluntary administration in April.
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 has become billionaire Richard Branson’s second airline to file for bankruptcy this year as industry continues to be ravaged by the coronavirus pandemic
Virgin Atlantic, which is based in London and 49% 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 for companies that span multiple countries, providing a way for foreign businesses to file for bankruptcy in the US court system.
The filing means the airline is not yet going into liquidation or going out of business.
Richard Branson has said he will sell his private island to save his ailing travel company
The Virgin Group airline filed for Chapter 15 bankruptcy protection in the Southern District of New York on Tuesday, just hours after the company told a London court it will be forced to fold if a rescue deal isn’t reached by next month
However, it marks the latest in a string of dire warnings for the airline.
In a London court hearing earlier Tuesday, Virgin Atlantic said it will run out of cash as soon as September unless a rescue deal is quickly approved.
The company is seeking a $1.6 billion rescue package and said that, without it, available cash will plummet and it will be forced to fold.
The restructuring package was announced last month but, despite securing the backing of most stakeholders, it is yet to be finalized.
It would allow Branson, who was criticized for asking the UK government for a bailout, to retain his 51 percent stake in the firm.
Branson has also said he will sell his private island to save the ailing company.
A UK judge gave the green light for the firm to convene four creditor meetings for August 25 to vote on the restructuring plan.
The Virgin Atlantic check-in area is seen empty at Heathrow airport, London, in April as the coronavirus pandemic wrought havoc on the airline industry
‘With support already secured from the majority of stakeholders, it’s expected that the restructuring plan and recapitalization will come into effect in September,’ a spokeswoman for Virgin Atlantic said.
‘We remain confident in the plan.’
This comes off the back of various efforts to save the struggling company.
In May, the airline announced plans to ax 3,150 jobs.
Delta CEO Ed Bastian has previously made it clear Delta will not offer a cash injection to save Virgin Atlantic from bankruptcy, according to Business Insider.
Virgin Atlantic mainly operates out of the UK and also has administrative offices in Atlanta, Georgia and New York.