Virgin Atlantic seeks bankruptcy protection in US

WASHINGTON • Virgin Atlantic Airways has become billionaire Richard Branson's second airline to file for Chapter 15 bankruptcy in the United States this year.

Chapter 15 allows foreign companies with US assets to protect themselves against claims, while they work on a turnaround plan at home.

Virgin Australia also sought protection after filing for voluntary administration.

Virgin Atlantic had said during proceedings in Britain that it planned to apply for the US protection, while it finalises a rescue plan that is already supported by a majority of its stakeholders.

Virgin Atlantic is seeking to secure a £1.2 billion (S$2.2 billion) rescue, which was announced last month.

"The process we have asked to be recognised is a solvent restructuring of an English company," a Virgin Atlantic spokesman said of the Chapter 15 filing.

The British process is proceeding with the support of a majority of its creditors, the company said.

The airline, 51 per cent owned by Mr Branson's Virgin Group and 49 per cent by US airline Delta, closed its Gatwick base and cut more than 3,500 jobs to contend with the fallout from the pandemic, which has grounded planes and cut demand for air travel.

Airlines globally are under pressure.

Three of Latin America's biggest - Latam Airlines Group, Avianca Holdings and Grupo Aeromexico - are reorganising in bankruptcy court in New York.

At least four US regional airlines have collapsed and revenue at carriers with vast international networks could see sales plunge 66 per cent this year, according to a Bloomberg Intelligence report.

Since Jan 1, Virgin Atlantic's reservations are down 89 per cent year on year, and demand for the second half of this year is at approximately 25 per cent of last year's levels, according to court papers.

Virgin Atlantic's restructuring plan in Britain depends on the approval of its Chapter 15 filing in the US, the company said in its filing.

Without the plan, there is uncertainty as to whether Virgin Atlantic could get enough creditor support to implement its restructuring in time to avoid going into formal insolvency proceedings.

Delta said it supported the plan and was "optimistic" that it would help Virgin Atlantic "maintain its position" in the travel market.

Virgin Atlantic said it needed to recapitalise "to not only survive the exigent threats posed by the Covid-19 global pandemic, but to thrive once the immediate global health crisis passes".

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

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on August 06, 2020, with the headline 'Virgin Atlantic seeks bankruptcy protection in US'. Print Edition | Subscribe