Virgin Atlantic has declared that it is filing for bankruptcy in the United States as an attempt to survive the COVID-19 pandemic which has halted the aviation industry greatly.
The airline is currently seeking protection under the U.S. bankruptcy code, allowing a foreign debtor to protect its assets in the country.
Virgin Atlantic was founded by the business tycoon Sir Richard Branson in 1984, with the current CEO being Shai Weiss.
This move is linked with a previous court process done in the United Kingdom, where Virgin Atlantic looked to secure approval from creditors to have a restructuring plan take place which is aimed at protecting its future during such a troubling time.
A Virgin Atlantic lawyer confirmed through legal papers that the company still needs an order from a U.S. court in order to make the terms of the rescue deal fully applicable in the U.S.
The airline stopped flights in April due to the pandemic, and has only recently resumed flights in July.
Due to the pandemic, the airline was forced to stop its flights at the popular Gatwick Airport in London, as well as getting rid of more than 3,000 jobs.
Sir Richard Branson called for the UK government to offer some financial aid to the airline earlier on this year, being ready to offer his Caribbean island resort in order to get a loan to secure a bailout, but this was rejected.
In July, Virgin Atlantic announced that £1.2 billion (€1.33 billion) had been received from private backers, with £200 million (€221.61 million) coming from Sir Richard Branson’s Virgin Group, as well as there being support from Delta Air Lines, with the latter owning 49% of Virgin Atlantic.
London’s High Court heard on Tuesday that the airline could be set to run out of money by the end of September if the bailout package that it is searching for is not approved by creditors.
Speaking for Virgin Atlantic, David Allison QC told Mr Justice Trower that if there is no “solvent recapitalisation”, one of which being an injection of new money, Virgin Atlantic’s directors will have “no choice” other than to place the airline into administration in September, in order to try and sell any assets if possible.
He also added that before the pandemic, “the group was not in any difficulty at all”.
He stated that “The group remains one of the leading airlines in the world and is an icon of British business and aviation” with the current difficulties being “the result of a global health disaster”.
Responding to the application, Mr Justice Trower allowed meetings of creditors to allow them to vote for a bailout, with these being set to take place on August 25.
In addition to this, the brand’s Australian airline, Virgin Australia, has announced that 3,000 jobs will be cut as it leaves voluntary administration after new ownership by U.S. investment company Bain Capital.
In previous statements, Virgin Atlantic has confirmed that demand for air travel will only return to the same levels of before the pandemic in 2023.