Virgin Atlantic files for bankruptcy in devastating blow to travel industry

Just months after Virgin Australia filed for voluntary administration, Sir Richard Branson’s international airline Virgin Atlantic has filed for bankruptcy. The London-based airline implored the UK Government to intervene but ministers rejected the appeal.

Now, the airline has admitted it is is on course to run out of finances by September.

In written submissions to the High Court in London, David Allison QC for Virgin Atlantic Limited said: “It is projected that the group would run out of money altogether during the week commencing 28 September 2020.”

In a bid to save Virgin Atlantic, company bosses proposed a major restructuring of the business on July 14.

It is not yet known exactly how the restructuring will impact future travel, or if holidaymakers will feel the after-effects.

However, in order to do so, the airline would need to secure approval from private creditors under a court-sanction process.

Agreements with First Data, Lloyds Bank’s Cardnet and American Express were reported.

The deal would see card payments from passengers being released the airline which was fast haemorrhaging money.

Further reports suggest that an agreement would see “recapitalisation” under which a US hedge fund Davidson Kempner would inject almost £200 million into the firm.

Sir Richard Branson himself could also be set to match this amount, utilising money raised from the sales of shares for his space venture Virgin Galactic.

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While Virgin Atlantic filed for Chapter 15 bankruptcy in the UK, they have also filed proceedings in the USA so that any restructure is recognised in their US arm also.

A Virgin Atlantic spokesman told “Virgin Atlantic attended court today as part of a solvent recapitalisation process under 26(A) of the UK Companies Act 2006. That process is proceeding with the support of the majority of our creditors.

“Following the UK hearing held earlier today, ancillary proceedings in support of the solvent recapitalisation were also filed in the US under their Chapter 15 process. These ancillary US proceedings have been commenced under provisions that allow US courts to recognise foreign restructuring processes.

“In the case of Virgin Atlantic, the process we have asked to be recognised is a solvent restructuring of an English company under Part 26A of the English Companies Act 2006.”

Virgin Atlantic successfully secured an order from the Court to convene meetings of affected creditors to vote on the Restructuring Plan on August 25.

A Virgin Atlantic spokesperson added: “In order to progress the private-only solvent recapitalisation of the airline, the Restructuring Plan is going through a court-sanctioned process under Part 26A of the Companies Act 2006, to secure approval from all relevant creditors before implementation.

“With support already secured from the majority of stakeholders, it’s expected that the Restructuring Plan and recapitalisation will come into effect in September. We remain confident in the plan.”

Mr Allison previously said passenger demand had “plummeted to a level that would, until recently, have been unthinkable.”

He added: “As a result of the COVID-19 pandemic, the group is now undergoing a liquidity crisis.”

Previously, Sir Richard Branson had offered up his private island in a bid to save the Australian arm of his brand.

Virgin Australia filed for a form of voluntary bankruptcy, with the mogul penning a letter to staff admitting it no longer had “cash in the bank”.

Despite this, he assured staff he would not “give up.

“We are determined to see Virgin Australia back up and running soon,” he wrote in a letter shared to Twitter.

It came after the Australian government rejected claims for financial help from the airline.

As a result, approximately 16,000 jobs were put at risk.

However, the airline was later purchased by Bain Capital, which is set to provide a “significant injection of capita” amid new restructuring plans and save thousands of jobs.

Despite this, around 3,000 jobs were confirmed to be at risk.

Virgin Australia is also axing its budget brand Tigerair.

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