Virgin Atlantic files for bankruptcy as coronavirus pandemic continues to devastate airline industry

Virgin Atlantic has filed for bankruptcy seeking protection from creditors in the US.

The airline is seeking protection under chapter 15 of the US bankruptcy code, which allows the assets to be protected in the country. 

This announcement comes just under a month after Virgin Atlantic revealed the company had secured funding to survive for another 18 months. 

Virgin Atlantic, which only flies long-haul international routes, suspended flights in April due to the coronavirus pandemic. 

The news of bankruptcy is the second from the Virgin Group in 2020, as Australia’s second largest airline, Virgin Australia, filed for administration in April.

Virgin Atlantic’s file for bankruptcy says it has negotiated a deal with stakeholders ‘for a consensual recapitalisation’ that will get debt off its balance sheet and ‘immediately position it for sustainable long-term growth’.

The company has also filed a proceeding in the high court in London and obtained approval to convene meetings of affected creditors to vote on the plan on August 25th.

A Virgin Atlantic spokesperson said the plan for the UK is ‘to secure approval from all relevant creditors before implementation’.

Virgin Atlantic reportedly told the high court it would run out of money in September if a restructuring deal is not approved.

Last month the airline explained that the private deal with stakeholders worth £1.2bn eliminated support from the British government, which billionaire Richard Branson had previously sought following much criticism.

The reorganisation is set to be completed by the end of summer, spread across the next 18 months. 

The airline closed its Gatwick base, cutting over 3,500 jobs, due to the COVID-19 pandemic.

The company 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’. 

Virgin said reservations are down 89% compared to last year and current demand for the second half of 2020 is approximately a quarter of 2019 levels.