The coronavirus pandemic has so far hit the airline business houses the most with restrictions placed on air travel for nearly 4-5 months.
Sinking in losses, Virgin Atlantic, the British airline owned by Richard Branson, has filed for bankruptcy under Chapter 15 of the protection act in the US on 4th August. The airline announced its condition after its statement at a court in the UK capital, London, where it said that it will soon be cashless unless its pending rescue deal is approved.
The petition has been registered in New York’s Sour then-District with Chapter 15 which permits non-US businesses having US assets to safeguard their company from claims to work parallel on measures to bring themselves to the shore.
During its hearing sessions at the UK court, the airline expressed its decision to file for the US protection, working simultaneously in this time for a rescue plan built by the support of most of its creditors. Virgin is seeking to secure a 1.2 billion-pound ($1.6 billion) rescue, which was announced in July.
A spokesperson for the company said, “The process we have asked to be recognized is a solvent restructuring of an English company.”
In a means to protect themselves from exposure to the virus, people are avoiding travel in the flights. This has led to Latin America’s three airlines, Latam Airlines Group SA, Avianca Holdings SA, and Grupo Aeromexico SAB, to file for bankruptcy in a New York court.
Reports from Bloomberg say that at least four US local airlines have drowned in the pandemic due to crashes in their finances. Further, they suggest that bigger companies with international carriers are likely to see a solid downfall of 66% in their sales in 2020.
According to the documents filed by Virgin Atlantic at the court, reservations for the flight are down 89% since the previous years while this year the carrier’s demands stood at 25% of last year’s. The papers said, “The group and its business have been adversely affected by the ongoing Covid-19 pandemic, which has caused an unprecedented near-shutdown of the global passenger aviation industry. Global aviation was one of the first industries to be impacted by the Covid-19 pandemic and is likely to be one of the last to fully recover.”
However, this rescue plan of the airline can be put into action only if the Chapter 15 petition is approved in US. If they don’t get access to the protection, Virgin might not be able to stand back up without the support of its shareholders.
“Because VAAL has material assets and operations in the United States, the recognition of the English proceeding and enforcement of the sanction order and the plan through Chapter 15 of the bankruptcy code are necessary to ensure that the plan is effective and binding,” the filing states.
The parent company, Delta, holds a 49% non-controlling share value in the airline. In a statement, it said, “Delta remains firmly supportive of its partner Virgin Atlantic as the airline proceeds with the fully funded recapitalization plan it announced in July.”
The case is Virgin Atlantic Airways Limited, 20-11804-mew, U.S. Bankruptcy Court for the Southern District of New York.
