On Tuesday, London-based airline Virgin Atlantic filed for Chapter 15 bankruptcy in New York, after the travel slowdown during the coronavirus pandemic slashed its year-over-year bookings by 89 percent. Virgin Atlantic is the second airline in Sir Richard Branson’s Virgin Group to file for bankruptcy, following Virgin Australia, which filed in April.
The Chapter 15 filing, a specific type of bankruptcy covering foreign companies with business in the United States—U.S. airline Delta owns a 49-percent stake in the British company. Under the filing, Virgin Atlantic’s U.S. assets will be protected from creditors as the airline seeks to restructure through proceedings in the U.K. courts. In essence, the airline will be able to keep its fleet of aircraft and its slots at airports as it hammers out the details of a potential $1.6 billion bailout plan.
Virgin Atlantic, which exclusively flies long-haul international routes, ceased flight operations entirely in April after demand dropped due to the coronavirus pandemic. To save money, it also cut 3,000 jobs and expedited the retirement of its Boeing 747 aircraft, which were expensive to fly and maintain.
But as of last month, things were looking up for the airline: it resumed limited flights in July as demand slowly grew. Those flights will continue to operate during the bankruptcy proceedings. But should the bailout fail to materialize during stakeholder meetings later this month, Virgin Atlantic could collapse in September, when it will run out of cash. At that point, the airline would be forced to sell its planes and airport slots, and it would fold entirely.
Luckily, the majority of Virgin Atlantic’s stakeholders have already agreed to the bailout, so the airline is hopeful that it’ll be kept on its feet a bit longer. Bankruptcy proceedings worked well for sister airline Virgin Australia—it was eventually purchased and therefore saved by American investment firm Bain Capital.