(RTTNews) - Billionaire Richard Branson's Virgin Atlantic has filed for Chapter 15 bankruptcy protection in the United States after being hit hard by travel restrictions due to the coronavirus pandemic. The process is part of the British airline's restructuring plan as it is seeking a 1.2 billion pounds rescue deal in the U.K.
The airline also filed a proceeding in the high court in London for its restructuring plan, aiming to secure approval from all relevant creditors before implementation.
The airline, which is partly owned by US airline Delta, reportedly told the London court that it might run out of cash in September if the rescue deal is not approved. The company, despite being fundamentally sound, critically requires restructuring and fresh injection of money for its future.
In London, Virgin Atlantic was approved to convene meetings of affected creditors to vote on the plan on August 25.
The airline's restructuring plan has been supported by a majority of the company's shareholders. The company expects to emerge from the restructuring process in September.
In the U.S., Virgin Atlantic filed its petition in the federal bankruptcy court in New York. Chapter 15 bankruptcy protection allows foreign companies with U.S. assets to protect themselves against claims during the restructuring process in their home country.
Regarding the Chapter 15 filing, a Virgin spokesperson said, "The process we have asked to be recognized is a solvent restructuring of an English company."
The company said in its court filing that its restructuring plan in the U.K. depends on the approval of its Chapter 15 filing in the U.S.
Virgin Atlantic's planes have been grounded since April following the spread of Covid-19 pandemic. In May, the company announced its plans to cut more than 3,500 jobs in the UK and close its operation at Gatwick airport.
As per the filing, Virgin's reservations are down 89 percent year-over-year, and demand for the second half of 2020 is about 25 percent of 2019 levels.
In July, the company raised 1.2 billion pounds from private sources, calling it a major milestone towards securing its future.
Following the coronavirus struggles, Virgin Group's Virgin Australia went into voluntary administration in April, and later bought by Bain Capital.
Hit hard by the coronavirus pandemic, the International Air Transport Association, which represents 290 airlines, recently said it expects that global air travel will not fully recover from the downturn until 2024.
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