The British airline, Virgin Atlantic, has filed for bankruptcy as the global aviation industry continues to grapple with the devastating effects of the Coronavirus pandemic.
According to a report by Daily Mirror, this recent action is coming after Virgin Australia filed for voluntary administration, a type of bankruptcy, in April.
An earlier appeal by the airline for a bailout from the British Government was turned down by ministers, leaving the airline in a race against time to secure new investment.
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The airline’s boss, Sir Richard Branson, even offered to pledge his Caribbean holiday island Necker in exchange for investment.
In the meantime, the airline said it will most likely run out of cash by September.
David Allison QC, for Virgin Atlantic Airways Limited, previously said: “The group’s financial position has been severely affected by the ongoing Covid-19 pandemic, which has caused unprecedented disruption to the global aviation industry.’’
‘’Passenger demand has plummeted to a level that would, until recently, have been unthinkable. As a result of the COVID-19 pandemic, the group is now undergoing a liquidity crisis.’’
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A spokesperson for Virgin Atlantic disclosed that the airline attended a court session on Tuesday as part of a solvent recapitalization process under 26(A) of the UK Companies Act 2006. That process would be going ahead with the support of the company’s majority creditors.
The airline’s official said, “Following the UK hearing held earlier today, ancillary proceedings in support of the solvent recapitalization were also filed in the US under their Chapter 15 process. These ancillary US proceedings have been commenced under provisions that allow US courts to recognize foreign restructuring processes.’’
‘’In the case of Virgin Atlantic, the process we have asked to be recognized is a solvent restructuring of an English company under Part 26A of the English Companies Act 2006.”
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The UK based airline is seeking for protection under chapter 15 of the US bankruptcy code, which allows a foreign debtor to shield assets in the country.
This move is coming less than a month after the airline disclosed that it had agreed a rescue deal worth $1.6 billion to secure its future beyond the Coronavirus crisis. Under the arrangement, Virgin’s boss, Richard Branson, would inject $200 million, with additional funds provided by investors and creditors.
This proposal needed to secure approval from creditors under a court-sanction process.
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Mr Allison told Justice Trower that the Virgin Atlantic Group has sound business model during a high court hearing on Tuesday.
It can be recalled that Virgin Atlantic, who have been heavily impacted by the coronavirus pandemic had put in some measures to ensure the future of the airline is safeguarded. Some of these measures include the reduction of its schedule to prioritize core routes based on demand, cut over 3,000 jobs and so on.