Virgin Atlantic Airways asks for protection from bankruptcy

News

Virgin Atlantic Airways asks for protection from bankruptcy

10.08.2020 News

British airline Virgin Atlantic Airways, which has assets and leading business, including in the United States, 49% of which belongs to the American Delta Airlines, filed a claim for bankruptcy protection in the Southern District of New York.

Chapter 15 of the US Bankruptcy Code: “Law on Prevention of Abuse in Bankruptcy and Consumer Protection” allows foreign companies with assets in the US to protect themselves from claims from creditors and the courts, while they are working on the recovery and restructuring plan at homeland.

“The process we are asking for is a viable restructuring of the British company,” a Virgin representative said due to Chapter 15. The company reported that the British process continues with the support of the majority of creditors.

The example of Virgin is not alone and reflects the problematic situation in the whole global aviation industry. The three largest airlines in Latin America – Latam Airlines Group SA, Avianca Holdings SA and Grupo Aeromexico SAB also reorganized in the court in bankruptcy cases in New York.

According to Bloomberg Intelligence, at least four US regional airline experienced a crisis, and revenues of major international carriers may fall by 66% this year.

In July, Virgin announced that company is seeking financing package of $ 1.6 billion. (£ 1.2 billion) and hopes for restructure in September, including attempts to change lending terms and renegotiate the lease on most of aircraft, if the claim is approved. Virgin Atlantic said that in September will not be able to meet own obligations on loans.

According to media reports, Delta has allowed Virgin to defer payments and hedge fund Davidson Kempner agreed to provide for company $ 220 million. (170 mln. Pounds).

In a statement, Delta said: «Delta still strongly supports the partner Virgin Atlantic, as the airline continues fully funded recapitalization plan, which was announced in July.”

The company expects to receive other funds from shareholders, and possibly private investors.

According to the submitted documents to the court by Virgin Atlantic, this year the number of airline bookings fell by 89% compared to the year before, and passenger traffic fell to about 25% from the level of 2019.

“The group and its business have been negatively affected by the ongoing COVID-19 pandemic, which has led to an almost unprecedented shutdown of the global passenger aviation industry,” said Virgin Atlantic management. “International aviation was one of the first areas affected by the pandemic COVID-19 and probably will be one of the last to fully recover.”

According to industry experts, the recovery will take several years.

In the face of heavy losses due to the pandemic, the US government has allocated ten domestic airlines, including the four largest, assistance under the “Wage Support Program” in the amount of more than $ 25 billion. Part of this state aid ends on September 30, several major US airlines have warned about potential layoffs tens of thousands of employees.

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