NEW YORK (AP) – Virgin Atlantic, an airline founded by British businessman Richard Branson, filed for protection in US bankruptcy court on Tuesday as it seeks to avoid the virus epidemic that is affecting the airline industry.
The airline filed Chapter 15 in a US federal bankruptcy court in New York following an action in the United Kingdom.
A Virgin Atlantic spokesperson said the bankruptcy filing was part of a court process in the United Kingdom, which carried out a restructuring plan announced by the airline last month. He said the process is backed by the majority airline’s creditors and the company hopes to emerge from the process in September.
A lawyer for Virgin Atlantic filed in court that the company needed an order from a US court to enforce restructuring conditions in the US
The airline is primarily a long haul operator, which includes flights between the UK and the US. The flight took off due to an epidemic in April and only resumed flights in July. It closed a base at London’s Gatwick Airport and cut about 3,500 jobs.
Branson appealed to the British government for financial help earlier this year – even stating that he would pledge his Caribbean island resort as collateral for the loan – but was reprimanded.
Last month, Virgin Atlantic announced that it had signed a deal to raise £ 1.2 billion (about $ 1.6 billion at current exchange rates) from private sources, including £ 200 million from Branson’s Virgin Group.
Atlanta-based Delta Air Lines, which owns 49% of the airline, agreed to accept payments it owed, and hedge fund Davidson Kempner agreed to lend Virgin Atlantic £ 170 million. Virgin Atlantic also delayed the delivery of Airbus jets.
Virgin Atlantic’s court moved insolvency since the start of the epidemic by Latam and Avianca, two of Latin America’s largest airlines in the US, and by Mexico’s Aeromexico. Virgin Australia’s sister airline Virgin Australia filed for protection from creditors in its home country in April.
Airlines have been hit by an outbreak of coronovirus which has led to travel restrictions and many people are afraid to fly. The International Air Transport Association, a trade group for global airlines, estimates that the industry will suffer a loss of $ 84 billion this year and revenue will decline by half from 2019 levels.
Branson was founded and still holds a 10% stake in Virgin Australia, which has announced plans to shed a third of its workforce as it measures back operations as part of its restructuring.
The airline, Australia’s second-largest carrier, seeks bankruptcy protection and its administrator Deloitte has entered into a binding agreement to sell the airline to Boston-based investment firm Bain Capital. The deal will take place within weeks for final approval of a meeting of 7 billion Australian dollars ($ 5 billion) Virgin creditors.