Virgin Atlantic, a British airline, is currently seeking protection under Chapter 15 of the United States bankruptcy code.
This announcement also marks the struggle faced by numerous carriers, including Australia’s 2nd largest airline, Virgin Australia, to survive amid severe decline in air travel demand due to the COVID-19 pandemic. Virgin Australia has been taken under the management of an administrator since April 2020. Reports claimed that Bain Capital, the new owner of Virgin Australia, is set to lay off 3,000 jobs, which is around 1/3rd of its employees. Additionally, Virgin Australia is likely to retire Tigerair, its budget brand, as a part of its turnaround plan.
The recent court filing for bankruptcy states that the airline had negotiated a deal with its stakeholders to ensure consensual recapitalization, which will help debt off its balance sheet and effectively position it for sustainable growth in the long-term. This move comes along the heels of the airline signing a rescue deal of $1.6 billion (£1.2 billion) to secure its position and increase profitability after the COVID-19 crisis.
The recent US filing is tied to a separate filing made by Virgin Atlantic to a British court, where the airline had gained approval to arrange meetings of the affected creditors to vote on the protection plan on 25th August. The airline, which is owned 51% by Virgin Group and the remaining percent by Delta, has announced its plan to cut around 3,000 jobs in the UK as well as close operations at its Gatwick airport.
According to Paul Scurrah, CEO of Virgin Australia, the airline will strengthen its position and drive its future business growth in the challenging global and domestic aviation market by collaborating with Bain Capital, which has supported its management team & turnaround plan. Bain also has assured the airline of a significant capital injection to recapitalize and retain several jobs.
The International Air Transport Association had previously warned airlines that the severe plunge in air travel demand will lead to revenue losses of over $84 billion (£64 billion) in 2020.
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https://www.bbc.com/news/business-53659844