Virgin Atlantic Airways is seeking Chapter 15 bankruptcy protection in the southern district of New York, court filings on Tuesday revealed. Chapter 15 allows foreign debtors to shield their assets from creditors.
The filing said that Virgin Atlantic had reached an agreement with stakeholders “for a consensual recapitalization” that will allow the company to pay off its debt and “immediately position it for sustainable long-term growth.” The airline reportedly said in a court hearing in London on Tuesday that it could run out of cash by September if a restructuring agreement is not approved.
The U.K.-based airline announced a £1.2 billion ($1.57 billion) agreement in July with shareholders and creditors to help the battered company deal with the COVID-19 pandemic.
Virgin Atlantic is 51% owned by the Virgin Group and 49% owned by Delta Air Lines. Virgin Australia, another airline company owned by the Virgin Group, also filed for bankruptcy in April.
Virgin Atlantic slashed more than 3,000 jobs and closed its base at London’s Gatwick Airport in May as a cost-cutting measure. The company canceled all passenger flights in April due to COVID-19 but then restarted operations in July.
The pandemic has devastated the airline industry, due to the drop in demand for domestic and international travel. United Airlines warned 36,000 employees in July about potential job cuts, while American Airlines has said it could lay off as many as 25,000 employees.