Virgin Atlantic, the European carrier founded by British entrepreneur Richard Branson, on Tuesday filed for debt relief in the United States as the balance sheet of the coronavirus on the airline industry continued to climb.
The company said it was not technically bankrupt and that it plans to continue operating during its restructuring, a process it hopes to complete by the end of September. Still, Virgin Atlantic has said in a court filing that it will run out of money and will have to close by the end of the month if it fails to strike a deal by then.
“With the support already secured from the majority of stakeholders, it is expected that the restructuring plan and recapitalization will come into effect in September,” a company spokesperson told CBS MoneyWatch in a statement. “We remain confident in the plan.”
Virgin Atlantic, which mainly offers long-haul travel between the UK and other parts of the world, had just over 8,500 employees at the end of 2018, company records show. It also had $ 630 million in cash and around $ 850 million in long-term debt at the time, the latest publicly available financial records for the company, according to FactSet.
The airline’s troubles precede the virus. In 2018, Virgin Atlantic lost nearly $ 75 million on revenue of $ 3 billion. The carrier, which is 49%, sought to negotiate a $ 1.6 billion refinancing deal with its creditors and investors.
As part of the deal, Branson was seeking to divest some or all of its stake in the airline. He had previously asked the British deposited for voluntary administration, another form of bankruptcy, in April.. It is the second Branson airline to seek legal protection since the start of the pandemic. Virgo Australia
Technically, Virgin Atlantic this week filed for Chapter 15 protection, a section of the U.S. bankruptcy code for companies that plan to continue operating but have both U.S. and foreign investors and lenders. The company previously announced that it plans to lay off 3,000 workers and scale back operations.
Virgin Atlantic put all of its flights on hold due to the coronavirus in April and only resumed flights in July. A search of the Virgin Atlantic website on Tuesday showed that flights were still available from Newark to London in late September, with a return economy ticket costing around $ 900. But many tickets for sale on the site were for seats on flights operated by Delta and other airlines.
Virgin Atlantic’s bankruptcy comes as many airlines announce layoffs and possible time off. Also on Tuesday, American Airlines announced it was offering early retirement packages to pilots already on leave. Last week, regional carrier GoJet, which operates flights for United Express, said it plans to lay off all of its 1,185 employees, including management.
According to CBS News transport correspondent Kris Van Cleave, nearly 83,000 airline workers could be put on leave in the coming months, according to airline regulatory documents.