Virgin Atlantic files for bankruptcy protection in US, Virgin Australia to close low-cost arm Tigerair

05 Aug 2020 / 23:21 H.

NEW YORK: Virgin Atlantic has applied for bankruptcy protection in the United States, court filings show, as the British airline – which has not flown since April because of coronavirus – seeks to tie up a rescue deal in the UK.

The company, part-owned by Richard Branson, grounded its planes in April because of the pandemic but announced plans for private funding worth £1.2 billion (RM6.6 billion) in July, what it called a "major milestone towards securing its future."

A court filing showed Virgin Atlantic sought Chapter 15 bankruptcy in New York on Tuesday, a move that would protect its US assets as a foreign debtor while it seeks approval in the UK from creditors for the rescue plan.

In court proceedings currently under way in Britain, Virgin Atlantic was given approval on Tuesday to hold creditor meetings to vote on the rescue plan.

The company has said it plans to slash annual costs by £280 million per year and announced plans earlier in the year to axe more than 3,000 jobs as the pandemic grounded most of its fleet.

Airlines globally have been slammed by the coronavirus pandemic, resulting in bailouts and thousands of job losses.

The Virgin Group has been particularly hard hit, with Virgin Australia going into voluntary administration in April before it was snapped up by a US equity firm.

Virgin Australia announced today it would close budget subsidiary Tigerair Australia and lay off 3,000 staff as it prepares to relaunch under new owners.

The carrier is attempting to revive its fortunes following its decision to go into voluntary administration in April shortly after Australia closed its international borders and domestic travel plunged.

Virgin Australia said in an announcement to the Australian Securities Exchange today that it would axe its budget Tigerair Australia brand and 3,000 jobs while retaining 6,000 staff. It would also continue the suspension of long-haul international flights and retire part of its fleet, with the country's borders likely to remain restricted into 2021.

"Demand for domestic and short-haul international travel is likely to take at least three years to return to pre-Covid-10 levels, with the real chance it could be longer," Virgin Australia CEO Paul Scurrah said in the statement.

"As a business we must make changes to ensure the Virgin Australia Group is successful in this new world," he added.

US private equity giant Bain Capital was successful in its takeover bid for Virgin Australia in late June. The deal is subject to regulatory approval and is due to be completed this month.

Before the pandemic, the airline had struggled for years against larger carrier Qantas, which would have enjoyed a virtual monopoly if Virgin went out of business.

Scurrah predicted that even if travel recovers to pre-pandemic levels, successful airlines will "look very different" to the way they did previously, requiring long-term capital and a lower cost base. – AFP

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