Richard Branson's Virgin Atlantic Airways files for bankruptcy protection in US

Virgin Atlantic plane at Heathrow Airport.
Sir Richard attracted criticism after calling for UK taxpayer help for Virgin Atlantic to survive the downturn. Photo credit: Getty

Sir Richard Branson's Virgin Atlantic Airways is seeking protection from creditors in the United States under Chapter 15 of the US Bankruptcy Code.

In paperwork submitted to a court in New York, the airline said it has negotiated a deal with stakeholders "for a consensual recapitalisation" that will get debt off its balance sheet and "immediately position it for sustainable long-term growth".

Virgin Atlantic had recently filed similar paperwork to the courts in London.

Bloomberg reported Virgin Atlantic told a London court it could run out of money in September if a restructuring deal is not approved.

In July, the airline said its private deal with stakeholders eliminates the need for support from the British government that billionaire founder Sir Richard had sought. The reorganisation is expected to be completed towards the end of this summer and be spread across the next 18 months.

The airline - 51 percent owned by Sir Richard's Virgin Group and 49 percent by US airline Delta - closed its Gatwick base and cut more than 3500 jobs to contend with the fallout from the COVID-19 pandemic, which has grounded planes and hammered demand for air travel.

It said it needed to recapitalise "to not only survive the exigent threats posed by the COVID-19 global pandemic but to thrive once the immediate global health crisis passes".

In July, Virgin Atlantic said it had agreed a rescue deal with shareholders and creditors worth NZ$2.3 billion.

Virgin said in a court filing reservations are down 89 percent from a year ago and current demand for the second half of 2020 is at approximately 25 percent of 2019 levels. Virgin Atlantic also owns Virgin Atlantic Holidays, a tour operator business and Virgin Atlantic Cargo.

Sir Richard had attracted criticism after calling for government help for Virgin Atlantic to survive the downturn.