Richard Branson's Virgin Atlantic has filed for bankruptcy protection in the United States after telling a court it would run out of cash next month if a pending rescue deal isn't approved.
Bloomberg reports the company had said during proceedings in Britain that it planned to apply for the US protection while it finalises a rescue plan that's already supported by a majority of its stakeholders. Virgin is seeking to secure a 1.2 billion pound ($2.37 b rescue, which was announced in July.
Chapter 15 bankruptcy protection allows foreign companies with US assets to protect themselves against claims while they work on a turnaround plan at home.
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More than 20 airlines have failed or have sought bankruptcy protection after during the past six months as the pandemic wiped out nearly all international travel earlier this year.
Capacity is running at just over 50 per cent of what it was last year and airlines which haven't been able to get state backing or raise sufficient funds privately are particularly vulnerable.
Bloomberg reports Virgin's reservations are down 89 per cent on last year and demand for the second half of 2020 is at approximately 25% of 2019 levels, according to court papers.
"The group and its business have been adversely affected by the ongoing Covid-19 pandemic, which has caused an unprecedented near-shutdown of the global passenger aviation industry," according to the court papers.
Virgin's restructuring plan in Britain depends on the approval of its Chapter 15 filing in the U.S., the company said in its court filing.
In mid-July Virgin Atlantic raised 1.2 billion pounds from private sources, including from founder Richard Branson, the Associated Press reported.
Branson's Virgin Group will provide 200 million pounds, while Delta Air Lines, which owns 49 per cent of the airline, has agreed to defer payments due to it. Hedge fund Davidson Kempner has also agreed to lend Virgin Atlantic 170 million pounds.