Virgin Atlantic Airway has filed for Chapter 15 bankruptcy protection today in the Southern District of New York.

Chapter 15 protection means the airline is in the process of restructuring and is not going out of business. When an organization is liquidating operations, that is when Chapter 7 protection comes into play.

Virgin Atlantic is working to secure a US$1.6 billion rescue plan that the airline announced in July. This is the second airline that Richard Branson has had to process for bankruptcy having done so for Virgin Australia earlier in 2020. Both bankruptcy filings are due to the effects of the COVID-19 coronavirus pandemic resulting in the lack of people flying.

When Virgin Atlantic filed for what is termed administration (bankruptcy), it told the London court it would run out of cash the following month if the rescue plan was not approved. The airline is working to renegotiate leases on most of its planes as well as loans it has taken in the past and can now not fully repay.

In court documents, the airline’s lawyers stated that “a more comprehensive recapitalization is necessary to secure the future of its business and ensure that it is able to meet its liabilities and funding requirements beyond mid-September 2020.”

Virgin Atlantic is mostly a long-haul operator with flights between the U.K. and the U.S. Flights were suspended in April because of the pandemic, and the airline just recently resumed flights last month in July.

Branson offered his Caribbean island resort as loan collateral when he appealed to the British government for financial help earlier in the year, but that was rebuffed.

The International Air Transport Association (IATA) has estimated that the industry will lose US$84 billion this year due to COVID-19 and revenue will drop by half from the previous year.

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