Virgin Atlantic has filed for Chapter 15 bankruptcy, a move that seeks to protect its assets from US creditors as it scrambles to finalize a rescue plan with the aid of the UK court system.
In the filing, the airline says it has 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.”
In May, Virgin Atlantic slashed 3,150 jobs and closed its base at London’s Gatwick Airport, consolidating operations at London Heathrow to cut costs. The airline also retired its iconic Boeing 747-400 fleet as a cost-saving measure.
In July, Virgin Atlantic secured a £1.2 billion rescue package from private funds. The package was to keep the airline flying as the aviation industry struggles to pick up from the slump in international travel.
The rescue package included £200 million from Sir Richard Branson’s Virgin Group, £170 million funding from US hedge fund Davidson Kempner Capital Management, and the postponement of about £450 million in payments to creditors (Virgin Group and Delta Air Lines).
However, the deal was not finalized.
Bloomberg reports that Virgin Atlantic told a London court it could run out of money in September if a restructuring deal is not approved. Its reservations are down 89% from a year ago and current demand for the second half of 2020 is at approximately 25% of 2019 levels.
London-based Virgin Atlantic, 49% of which is owned by Delta Air Lines, flies exclusively long-haul international routes. It suspended all passenger operations in April when the coronavirus pandemic triggered a crash in travel demand. It began flying passengers again in July.
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