by Associated Press | August 05, 2020

NEW YORK (AP) - Virgin Atlantic, the airline founded by British businessman Richard Branson, filed Tuesday for protection in U.S. bankruptcy court as it tries to survive the pandemic that is hammering the airline industry. The airline made the Chapter 15 filing in U.S. federal bankruptcy court in New York after a proceeding in the United Kingdom.

A spokesperson for Virgin Atlantic said the bankruptcy filing is part of a court process in the United Kingdom to carry out a restructuring plan that the airline announced last month. The process is supported by a majority of the airline's creditors, and the company hopes to emerge from the process in September, she said. A Virgin Atlantic lawyer said in a court filing that the company needs an order from a U.S. court to make terms of the restructuring apply in the U.S. 

The airline is primarily a long-haul operator, including flights between the U.K. and the U.S. It stopped flying in April due to the pandemic and only resumed flights in July. Virgin closed a base at London's Gatwick Airport and cut about 3,500 jobs.

Branson appealed to the British government for financial help earlier this year - even saying that he would pledge his Caribbean island resort as collateral for a loan - but was rebuffed. 

Last month, Virgin Atlantic announced that it had put together a deal to raise nearly US$1.6 billion from private sources, including more than US$260 million from Branson's Virgin Group.

Atlanta-based Delta Air Lines, which owns 49 percent of the airline, agreed to defer payments it was owed, and hedge fund Davidson Kempner agreed to lend Virgin Atlantic about US$220 million. Virgin Atlantic also delayed deliveries of Airbus jets.

Virgin Atlantic's court moves follow bankruptcy filings in the U.S. by Latin America's two biggest airlines, Latam and Avianca, and by Mexico's Aeromexico since the start of the pandemic. Virgin's sister airline Virgin Australia filed for protection from creditors in its home country in April. 

Virgin Australia plans to scale down its operations under new U.S. owners and shed a third of its staff, the nation's second-largest airline said on Wednesday. Branson still owns 10 percent of the Australian airline. The Brisbane-based company in April became the world's largest airline to seek bankruptcy protection after the pandemic virtually grounded the aviation industry.

Virgin's administrator Deloitte's has entered into a binding agreement to sell the airline to the Boston-based investment firm Bain Capital. The deal will go within weeks for final approval to a meeting of Virgin creditors who are owed about US$5 billion.

Paul Scurrah, CEO and managing director of the Virgin Australia Group, has announced plans to cut 3,000 jobs plus long-haul flights from Australia to Los Angeles and to Tokyo to try to reset the business for lower global demand. The domestic and short-haul international fleet would become all Boeing 737s, except for regional and charter aircraft. Boeing 777s and Airbus A330s would be shed. Virgin's budget subsidiary Tigerair Australia would be discontinued, as would its Airbus A320s.

"Demand for domestic and short-haul international travel is likely to take at least three years to return to pre-COVID-19 levels, with the real chance it could be longer, which means, as a business, we must make changes to ensure the Virgin Australia Group is successful in this new world," Scurrah said in a statement.

While the workforce would be slashed to 6,000, the airline hopes to build back up to 8,000 staff as the aviation market recovers.

Backed by Bain Capital, with more than $100 billion assets under management, Virgin Australia would have "a strong balance sheet to withstand material future shocks to the industry," Scurrah said.

Aside from Branson, Virgin Australia's major shareholders are Singapore Airlines and Etihad Airways, and Chinese investment conglomerates Nanshan Group and HNA Group.

The airline sought bankruptcy protection after the Australian government refused its request for a AU$1.4 billion ($1 billion) loan. Australia's Treasurer Josh Frydenberg told reporters at the time his "government was not going to bail out five large foreign shareholders with deep pockets who together own 90 percent of this airline."

Rival Qantas Airways argued that it had three times more revenue than Virgin and was therefore entitled to a US$3 billion loan if the smaller airline was not to gain an unfair advantage.