Virgin Atlantic files for bankruptcy in US due to pandemic

Virgin Atlantic files for bankruptcy in US due to pandemic

Virgin Atlantic Airways filed for bankruptcy in the U.S. on Tuesday as it suffers a financial toll during the coronavirus pandemic.

The airline filed its petition in the Southern District of New York under Chapter 15 bankruptcy protection, which allows foreign companies with assets in the U.S. to shield themselves against claims as they work on a plan to rejigger their finances.

The move came after the airline told a London court it is expecting to run out of cash in September unless a $1.2 billion rescue package is approved.

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“Following the UK hearing held earlier today, ancillary proceedings in support of the solvent recapitalisation were also filed in the US under their Chapter 15 process. These ancillary US proceedings have been commenced under provisions that allow US courts to recognise foreign restructuring processes,” a Virgin Atlantic spokesperson said in a statement.

“In the case of Virgin Atlantic, the process we have asked to be recognised is a solvent restructuring of an English company under Part 26A of the English Companies Act 2006.”

The company said it plans to operate as it restructures itself and that it is confident it will ultimately secure the funds it needs under the rescue deal it reached with shareholders and creditors in July. 

“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,” the spokesperson said.

The airline, which is owned by Virgin Group and Delta Airlines, has suffered a heavy financial toll since the coronavirus pandemic began, shuttering its base in Gatwick, England and cutting more than 3,500 jobs.

It is just one of several airlines that has had to cut jobs and flights, among other steps, as demand for air travel plummets in the midst of the pandemic.