RICHARD Branson’s Virgin Atlantic has filed for bankruptcy protection as its revealed the airline may run out of cash next month.
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It came just hours after the company told a court in London it could be forced to fold as early as next month.
Virgin Atlantic lawyer David Allison QC told the High Court that passenger demand had “plummeted to a level that would until recently have been unthinkable”.
The Virgin Group airline filed for Chapter 15 bankruptcy protection in the Southern District of New York on Tuesday.
The court filing means it is protected from the US bankruptcy courts, and signals to them about rescue plans underway abroad.
Branson’s flights have been hit hard by the pandemic, with thousands of planes grounded worldwide due to fears over the spread of the virus.
Virgin Atlantic, which is based in London and 49% owned by Delta Air Lines, was forced to ground all planes back in April.
It was back flying again in July, but travel restrictions and low consumer confidence has still seen small passenger numbers.
Virgin’s filing in the US court said it had negotiated a deal with stakeholders “for a consensual recapitalization“.
It said it would clear its debts and “immediately position it for sustainable long-term growth.”
A Virgin Atlantic spokeswoman said the restructuring plan was before the UK courts “to secure approval from all relevant creditors before implementation”.
It comes as the World Travel and Tourism Council warned that nearly three million British jobs in the sector are on the verge of disappearing as the industry lost £142billion.
Chapter 15 bankruptcy protection is used to block creditors who want to file lawsuits or tie up assets in the US.
It does not mean the company is going out of business.
Virgin Atlantic warned a court in London that it might run out of the cash at the end of September unless it secures a rescue plan.
The company has an asset management firm waiting to loan it £170 million to help prop it up as it restructures.
In a court filing, it said reservations are down 89 per cent from a year ago – and demand for the rest of year is down 75 per cent.
Virgin Atlantic bosses will now be allowed to meet with their creditors to vote on the rescue plan on August 25.
It comes after Branson – who has a net worth of almost £4billion – faced criticism after calling for the Government help prop up Virgin Atlantic.
The airline had to close its base at Gatwick and cut more than 3,500 jobs to deal with the pandemic.
He previously lobbied for a a £500million loan funded by public cash to help keep the airline alive.
Ryanair boss Michael O’Leary said Branson – worth an estimated £3.8 billion – can “bail himself out” and slammed him for trying to “fleece” the taxpayer.
Branson was also criticised after forcing thousands of staff to take eight weeks unpaid leave as a result of the coronavirus crisis.
Labour MP Angela Rayner tweeted: “Richard, flog your private island and pay your staff, we are in unprecedented times here.
“Now is the time your staff need support after making mountains of cash for the company.”