Virgin Atlantic has filed for Chapter 15 bankruptcy protection in New York as the company seeks approval for a $1.5 billion recapitalization plan.
On Tuesday, before the Chapter 15 filing, the company won approval from a court in the United Kingdom to call a meeting of creditors on August 25 to vote on the restructuring, which the company says has the support of shareholders and existing creditors, including Delta Airlines.
“Following the U.K. hearing held earlier today, ancillary proceedings in support of the solvent recapitalization were also filed in the [United States] under their Chapter 15 process,” a spokesperson for the company said. “These ancillary U.S. proceedings have been commenced under provisions that allow U.S. courts to recognize foreign restructuring processes.”
At the hearing in London, the company said would effectively run out of cash in September.
Last month, Virgin Atlantic announced the recapitalization plan, which would be deployed over 18 months. Under the plan, existing shareholders would contribute $750.6 million. Richard Branson’s Virgin Group would contribute $262 million and hedge fund Davidson Kempner would provide $188 million.
Delta chief executive officer Ed Bastian has said that Delta would not offer cash to keep Virgin from bankruptcy. Delta owns 49% of the company.
Virgin suspended passenger flights in April due to the COVID-19 pandemic. It resumed flights in July but was faced with weak demand. The company also laid off 3,550 staff, retired its Boeing 747-400 fleet, and closed its base at Gatwick Airport, consolidating operations at Heathrow.
Meanwhile, Virgin Australia said it is cutting 3,000 jobs, getting rid of some planes, and focusing on shorter flights under a comprehensive restructuring plan under its new owner, Bain Capital. The company said Australian airports were recording passenger numbers less than 3% of last year.
The International Air Transport Association has said it does not expect the air travel industry to recover from the global health crisis until 2024.