Breaking news has come in within the last few minutes, that London based carrier, Virgin Atlantic filed for Chapter 15 bankruptcy in New York this evening (Tuesday 4 August 2020), becoming the second Virgin Group airline to fall into bankruptcy- following Virgin Australia filing for voluntary administration in April.
A carrier in trouble…
Despite reducing staff numbers and aircraft flying, the carrier has suffered significantly due to the Coronavirus Pandemic. The airline announced a £1.2bn rescue package in July 2020 though has yet to finalise talks. The airline’s venture for private investment follows refusal of a government bailout from the United Kingdom, despite Virgin Group Founder, Richard Branson, offering his private island as collateral for a loan/bailout.
What is a Chapter 15 Bankruptcy?
Chapter 15 is a form of bankruptcy designed for cases that involve multiple countries. It provides a mechanism for foreign-based companies undergoing bankruptcy proceedings in their own country to access the US court system. It effectively protects Virgin’s US assets from creditors as a UK court oversees claims. US-based Delta Airlines own a 49% stake in the carrier, though have refused to offer a cash injection to save the carrier going under.
Under a Chapter 15 Bankruptcy, the carrier is not suspended nor has it entered administration in the UK, though a statement released earlier last month confirmed that “without a rescue package” the carrier would “run out of cash next month” (End of August 2020) If the carrier is able to secure a rescue package by the end of the month, it is likely total collapse can be averted.
“One of the most important goals of Chapter 15 is to promote cooperation and communication between US courts and parties of interest with foreign courts and parties of interest in cross-border cases,”
We will continue updating this article as more information becomes avaliable.
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