Virgin Atlantic, the airline founded by British businessman Richard Branson, filed Tuesday for protection in USA bankruptcy court as it tries to survive the virus pandemic that is hammering the airline industry.
The airline filed its petition in the Southern District of NY.
Virgin Atlantic has previously said it does not expect demand for air travel to return to pre-coronavirus pandemic levels until 2023.
Last month, Virgin Atlantic announced that it had put together a deal to raise 1.2 billion pounds (nearly $1.6 billion at current exchange rates) from private sources, including 200 million pounds from Branson's Virgin Group.
Chapter 15 bankruptcy is designed for cases that involve multiple countries.
Virgin Atlantic Airways Limited, referred to as "the company" in written submissions, forms part of the Virgin Atlantic Group, which was referred to as "the group". The UK process is proceeding with the support of a majority of its creditors, the company said. "These ancillary United States proceedings have been commenced under provisions that allow USA courts to recognize foreign restructuring processes".
"The process we have asked to be recognized is a solvent restructuring of an English company", a Virgin spokesperson said of the Chapter 15 filing.
The filing comes after the airline spent a few months operating no passenger operations. It was only on July 20th that Virgin Atlantic resumed passenger flights. First, the carrier only operates global widebody routes. These routes were hit by border closures and evaporating demand that severely impacted Virgin's financial state. In this case, Virgin Atlantic is using the system to protect its USA assets from creditors while a United Kingdom court will oversee claims.
The airline said that if the deal is not approved, its projections showed that its available cash would drop to just GPB49 million (USD64 million) by the end of September, forcing it to sell its London Heathrow slots and effectively shut down its business.
Giving up Heathrow slots would be an terrible outcome for the airline.
Bloomberg reports the company had said during proceedings in Britain that it planned to apply for the U.S. protection while it finalises a rescue plan that's already supported by a majority of its stakeholders.
Virgin Atlantic hasn't been immune from the airline industry's pandemic problems.
"One of the most important goals of chapter 15 is to promote cooperation and communication between US courts and parties of interest with foreign courts and parties of interest in cross-border cases", the USA court system says on a website explaining the proceedings.