Virgin Atlantic Airways has filed for bankruptcy protection for its United States business. This follows after its sister company, Virgin Australia, doing similar in a form of bankruptcy in Australia and England earlier in 2020.

Virgin Atlantic filed for Chapter 15 bankruptcy protection in a New York court on 4th August 2020. Chapter 15 bankruptcy allows a foreign company to file for bankruptcy in the United States court system. It applies in insolvency cases that involve people or businesses with assets in more than one country.

Virgin is trying to secure a $1.6 billion rescue, which it announced in July 2020. Virgin tells the court that the five-year plan is backed by a majority of its shareholders. The company also told the court that it will run out of funds by September 2020 if the request is not approved.

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“The ongoing COVID-19 pandemic has had an adverse impact on not only [Virgin Atlantic], but the aviation industry as a whole, occasioning the near shutdown of the global passenger aviation industry.

“While [Virgin Atlantic] has taken various measures to manage its liquidity in light of the unprecedented financial and operating conditions it faces, a more comprehensive recapitalization is necessary to secure the future of its business and ensure that it is able to meet its liabilities and funding requirements beyond mid-September 2020,” the company’s lawyers wrote in the filing.

Virgin’s reservations are down 89% year-over-year since January 2020. Court documents reveal that demand in the second half of 2020 is at about 25% of 2019’s demand.

Virgin has an asset management firm waiting to loan it $222 million to lift its finances. However, this is pending the time its rescue plan gets approval from stakeholders and creditors. Its shareholders, Virgin Group, cost savings, and possibly private investors will also pitch in to support the airline.

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