Richard Branson’s Virgin Atlantic files for bankruptcy

Virgin Atlantic has filed for bankruptcy in the US in yet another body blow for the airline industry.

The airline is seeking protection under chapter 15 of the US bankruptcy code, which allows a foreign debtor to shield assets in the country.

Non US companies use chapter 15 to block creditors who want to file lawsuits or tie up assets in the United States.

It is the second Virgin-branded airline to struggle this year. Virgin Australia went into administration in April.

The company is still looking to complete a rescue deal worth £1.2 billion ($1.6 billion) to secure its future beyond the coronavirus crisis.

Yesterday Virgin also filed action in a British court, where Virgin Atlantic obtained approval to convene meetings of affected creditors to vote on the plan on August 25.

An airline spokeswoman said the restructuring plan was before a British court “to secure approval from all relevant creditors before implementation.” She added the “process is proceeding with the support of the majority of our creditors.”

According to reports Virgin Atlantic told a London court it could run of money in September if a restructuring deal is not approved.

Early on in the coronavirus crisis Sir Richard Branson had asked the government for help.

The UK government has made it clear that Virgin Atlantic will not receive financial help from British taxpayers.

The airline, 51% owned by Branson’s Virgin Group and 49% by U.S. airline Delta, closed its Gatwick base and cut more than 3,500 jobs to contend with the fallout from the COVID-19 pandemic, which has grounded planes and hammered demand for air travel.

It added in a court filing reservations are down 89% from a year ago and current demand for the second half of 2020 is at approximately 25% of 2019 levels. Virgin Atlantic also owns Virgin Atlantic Holidays, a tour operator business and Virgin Atlantic Cargo.