Virgin Atlantic airline files for bankruptcy
The airline, founded by Sir Richard Branson, has filed for bankruptcy in the US. This is done to survive the pandemic, that had serious impact on the aviation industry. Virgin Atlantic is searching for protection under a section of the US bankruptcy code, which enable a foreign debtor to shield assets in the country. A Virgin Atlantic lawyer said, in legal papers, that the company needs an order from a US court to make the terms of the rescue deal apply in America.
Because of Covid crisis, the airline, which is mainly a long-haul operator, stopped flying in April and restart to fly only in July. As a consequence, the airline has closed its operation at Gatwick and removed more than 3,000 jobs.
Earlier this year, Sir Richard Branson asked the UK government for financial help but he was rejected, even though he promised he would pledge his Caribbean Island resort as collateral for a loan.
Last month, Virgin Atlantic announced that it had set up a deal to raise £1.2bn from private backers, including £200m from Sir Richard’s Virgin Group and support from Delta Air Lines (which owns 49% of Virgin Atlantic). Sadly, if creditors don’t approve the bailout package, Virgin Atlantic could run out of money by the end of September.
David Allison QC said that without a “solvent recapitalisation” (including an injection of new money), Virgin Atlantic’s directors can only place the company into administration in mid-September 2020, in order to liquidate the business and sell any assets. He also added that before the pandemic, the group was not in any difficulty. Despite this, the group remains one of the leading airlines in the world and an icon of British business and aviation. As said by Allison ” The problems that the group now faces are not of its own making but are the result of a global health disaster “.
Previously, Virgin Atlantic has said that they have to wait at least up to 2023 to see a return in demand for air travel to pre-coronavirus pandemic levels.
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