Did Virgin Atlantic really file for bankruptcy? Not entirely…
“Virgin Atlantic airline files for US bankruptcy protection.”
The headline – or some variation of it – blared across newswires and online media sites Tuesday.
But the splashy headlines detailing Virgin Atlantic’s “bankruptcy filing” may require an asterisk – or at least an explanation.
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It is true that the London-based carrier founded by British tycoon Richard Branson did file a type of bankruptcy protection in the United States on Tuesday. But Virgin Atlantic sought what’s known as “Chapter 15” protection, a relatively obscure filing that’s different than the Chapter 11 protection normally sought be ailing carriers that are seeking to reorganize.
In fact, Virgin Atlantic hasn’t even entered into “administration” – the U.K.’s version of bankruptcy – in its home market. In March, regional carrier Flybe entered administration, ceasing operations with immediate effect.
So, what’s with all of Tuesday’s internet headlines about bankruptcy?
It’s all part of the plan, Virgin Atlantic executives said late Tuesday as they belatedly began to push back against the mushrooming news reports that appear as though they may have caught the company off guard.
Related: Good news: Virgin Atlantic unveils £1.2 billion rescue plan, avoids pandemic-induced bankruptcy
The airline sent a statement to media early Wednesday morning to address what it called "misreporting overnight."
Virgin Atlantic characterized the Chapter 15 filing in the U.S. as a procedural move, saying in its statement that the "ancillary US proceedings" are only part of an effort to have "U.S. courts to recognize foreign restructuring processes."
The carrier's ongoing restructuring effort includes a voluntary restructuring package with creditors that’s currently working its way through British courts.
That “process is proceeding with the support of the majority of our creditors”, Virgin Atlantic said in a statement on Wednesday.
Still, there’s no question that Virgin Atlantic is struggling. In a British court appearance on Tuesday, Virgin Atlantic warned that it could run out of money next month if its rescue package fails, according to Bloomberg News.
And that’s what led to the Chapter 15 filing in a New York court. It’s not an outright filing of bankruptcy protection in the U.S., but rather a move to protect the airline’s assets in the United States against possible claims by creditors here as it pursues its rescue plan in the U.K.
“The process we have asked to be recognized is a solvent restructuring of an English company,” Virgin Atlantic said in a statement about the Chapter 15 filing. It also noted that “the U.K. process is proceeding...”
The airline resumed scheduled passenger flights on July 20, a return to the skies after suspending service during the early stages of the coronavirus pandemic. Currently, it's operating a limited flying schedule to Hong Kong, New York, Los Angeles and Barbados from its hub at London Heathrow.
By October, the carrier plans to operate at least 19 routes.