A month after announcing that it had secured financing to ensure the airline’s continuation for the next 18 months, Britain’s Virgin Atlantic has filed for Chapter 15 bankruptcy protection in the U.S.
The move is a strategic one employed by non-U.S. companies to restrict creditors from tying up assets or filing a lawsuit in the U.S. The move comes hot on the heels of Virgin Australia, another carrier in the Virgin Group, which went into administration in April with debts of US$6.8bn and over 12,000 creditors. In addition to filing for bankruptcy protection in the southern district of New York, the debt-ridden carrier also filed proceedings in a London court where Virgin Atlantic obtained approval on Tuesday to convene meetings of affected creditors to vote on a restructuring plan on August 25.
The situation is not as bleak as may seem for Virgin Atlantic as it has successfully negotiated a deal with stakeholders “for a consensual recapitalization” that will get debt off its balance sheet and “immediately position it for sustainable long-term growth”.
51%-owned by the Virgin Group and 49%-owned by Delta Air Lines, the British carrier has seen flight reservations drop 89% when compared to the same period last year, while second-half 2020 demand has dropped to 25% of 2019 levels. In July the carrier confirmed it had agreed a rescue deal with shareholders and creditors worth £1.2bn (US$1.57bn) to secure its future beyond the coronavirus crisis.
