Virgin Atlantic has filed for bankruptcy in the United States as it immediately finalizes a $1.5 billion plan to recover from the crisis. The United Kingdom-based company filed for Chapter 15 bankruptcy protection in New York, which protects the US assets of foreign companies undergoing restructuring proceedings in their home country. The US filing followed a UK court hearing earlier the same day. Virgin Atlantic obtained approval to call a meeting of creditors on August 25 to decide on the restructuring plan.
Virgin Atlantic announced a $1.5 billion restructuring deal last month. to keep the airline solvent just days before it resumed passenger flights. Shareholders, including Delta Air Lines (DAL), and existing creditors support the plan. US hedge fund Davidson Kempner is providing £150 million ($188 million) in secured financing as part of the recapitalization plan. Richard Branson’s Virgin Group is contributing £200 million ($262 million).
Virgin Atlantic remains confident in the plan
Virgin Atlantic has already laid off 3,550 employees and closed its base at London’s Gatwick airport, as the aviation saw its worst recession ever due to the coronavirus pandemic.
Sister company Virgin Australia on Wednesday announced a sweeping restructuring plan under the new owner, Bain Capital. The airline is cutting off 3,000 jobs (about a third of its workforce) and discontinuing its low-cost carrier, Tigerair Australia.
Global air travel isn’t expected to completely recover from the coronavirus pandemic until 2024, according to the International Air Transport Association. The group blamed the slow recovery on several factors, like lack of consumer confidence, the decline in business travel, and coronavirus surges in the United States and elsewhere.