Many airlines have been forced to file for bankruptcy amid the market conditions caused by the COVID-19 pandemic. The largest Latin American carriers in the world filed for bankruptcy. Now, a European carrier has filed for bankruptcy. According to sources, Virgin Atlantic has filed for Chapter 15 Bankruptcy in New York.
Chapter 15 Bankruptcy is bankruptcies that involve usually multiple foreign countries. Additionally, it is a way for foreign companies like Virgin Atlantic to access the U.S. Court system
The news arrives after Virgin Atlantic told courts in London that it would run out of money in September without any form of government aid. By September, it would only have 49 million pounds, not meeting the 75 million required in a bondholders agreement. This would force the carrier to sell its valuable London-Heathrow slots, therefore causing the airline to fold. Virgin Atlantic is looking to secure a deal for a 1.2 billion pound investment from the government.
Virgin Atlantic will vote on a restructuring plan on August 25th via four creditor meetings. Three of those creditors have agreed to back the plan. A spokeswoman states, "With support already secured from the majority of stakeholders, it's expected that the restructuring plan and recapitalization will come into effect in September." The restructuring plan needs to be approved at a hearing on September 2nd.
A U.S. based hedge fund David Kempner Capital Management will give 170 million pounds in financing to Virgin Atlantic while Richard Branson will finance 200 million pounds via Virgin Galactic. The carrier's plan includes 450 million pounds in creditor deferrals and 400 million pounds in payment delays/waivers from Delta Airlines and Virgin Group.
Virgin Atlantic is partly owned by Delta Airlines with a 49% stake. Delta Airlines has struggled with the effects of current market conditions on its own as it has been forced to retire aircraft and seek government aid of its own from the United States.
Virgin Atlantic is not the only airline in the Virgin group to declare bankruptcy. Its sister in Australia, Virgin Australia filed for bankruptcy protection as well.
Virgin Atlantic has been affected heavily by market conditions. For example, it has been forced to accelerate the retirement of its A340 and Boeing 747 fleet. Its flights had been suspended for a short period of time from April to July. During the period, it had been forced to operate cargo flights.
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