Virgin Atlantic filed for Chapter 15 Bankruptcy Protection in New York on August 4th, 2020, to pave the way for an international effort to recapitalise the boutique airline, before funds run out. Despite the news, the airline has not gone out of business, and your miles are fine, for now.
As odd as it sounds, the Chapter 15 Bankruptcy filing is a “good thing” for the future hopes of a Virgin Atlantic survival.
The move, which involves the feared word “bankruptcy”, makes it easier for US court efforts to coincide with those in the UK, where recapitalization efforts are ongoing. The airline has already announced clear plans to keep cash flow in the interim, in hopes of weathering the unprecedented drop in demand, but those plans must first be approved.
Without the Chapter 15 filing, that would’ve been impossible. In the last decade, airlines including Delta, United, and American all filed for bankruptcy in the United States using Chapter 11, and Japan Airlines filed for Chapter 15 in 2010.
Chapter 15 specifically allows for cross border solutions to debt issues, rather than competing interests in different countries, which can end up cancelling each other out.
In July, Virgin Atlantic announced a £1.2 billion ($1.5 billion) proposal to inject funds into the boutique, long haul operation, currently ravaged by the covid-19 global pandemic.
But without protecting airline assets from further US complications, the new funding proposals wouldn’t have the chance to be approved by the four outstanding creditors, in time to save the operation.
Basically, Chapter 15 filings in New York allow Virgin Atlantic to officially pursue their £1.2 billion rescue package and get shareholders and debt obligations, both old and new to go along with it, without outside influences trying to sell assets or tear things apart before the airline has a chance to survive.
According to Bloomberg, in the court filing, Virgin Atlantic stated operations wouldn’t be able to continue past September, if new cash from the proposed rescue package couldn’t be accessed.
After the New York move, Virgin Atlantic must now convince four creditors to approve their new recapitalization plan, which will see a variety of debts deferred to a later date, aircraft leases reduces or terminated early and other measures, including new money injections from the Virgin Group.
Delta Airlines, a 49% owner of Virgin Atlantic will also likely earn preferred stock in exchange for deferring monies owed. Delta recently receives billions in US airline bailouts, and has expressed interest in a second. UK Government has yet to bail out any UK airline.
Three out of four creditor groups have already signed onto the £1.2 billion proposal, and final meetings will take place on August 25th to secure a final vote. Ultimately, the airlines interim fate will not be decided until this date, provided filings in New York go to plan.
But what about flights, and miles?
The court formalities are part of a necessary process to allow votes for new funding to occur, and have no impact on flights in the immediate future, or any value to Virgin Atlantic Flying Club Miles. Flights scheduled to depart this week are still scheduled to depart, at the time of writing.
Airline loyalty programs are often worth more than airlines themselves by a multiple of up to 3X, and even if Virgin is eventually unsuccessful in realizing its £1.2 billion rescue plan, it wouldn’t necessary make Virgin Atlantic Flying Club miles useless.
Virgin Atlantic isn’t out of the woods, but this is far from the end of the story.
As a businessman I understand the #15 filing, its a little different twist on/in BK laws having said that I wonder what the “end game” is coming out. Certainly one does not think for one moment that the transatlantic lucrative market will come roaring back, far from it and thats where VA earns it greatest per seat revenue. International travel will be down for sometime as the world economies work their way out, some travel sure but on the scale once flown certainly not. Frequency and sizing will be the norm more fuel efficient birds gone will be the 747/380/330, the coming of age of the 787/350 and yes single isle planes. Then there will be exactly how many carriers will survive a story yet to be written. While VA may still be in business I am not so sure I would bet on the airline.
I hope you’re right. I have an upcoming ANA F flight that I’ve had to reschedule over and over, and will probably have to again. As I understand, ANA only gets paid by VS after the flight, so if ANA doesn’t think they will get paid, perhaps they won’t honor the ticket. I’ll be sweating VS solvency until I’m sitting on board sucking down Krug.
Any updates on this? I am due to book an ANA F rewards flight later in this month for November 2021 and I’m worried about the process.
Still very much alive.. and taking bookings.
Things continue to look grim for the entire global airline industry, not just Virgin. A probable second wave of Covid-19 has Governments and businesses confused about what next steps to take. A vaccine will help but there’s no guarantee that will bring back confidence in flyers who may take some time before feeling comfortable enough to take unnecessary trips. And prices for flights will probably go up as greedy (or desperate) airlines try to recoup losses too quickly. Just like the Qantas flight from Perth to London, we are in for the long haul waiting for anything to get back to what we
were used to. Sadly, my ever-expanding wide body will be grounded for quite some time.
My miles are not “fine”. They are “frozen” and have been since ANA cancelled my flight. My request for a refund is now 3 months old and in the meantime the miles are in the ether zone! So fliers are in no better shape than creditors.
My cousin has been waiting since May for $2000 refund
been waiting for a refund since may 30 so three months on no refund not good enough
Dude! You’re famous. VS just referenced you in their blast email to their customers.
At this point, especially with Covid, I don’t understand Virgin’s long-term play. They are too small to compete with BA.
They should have become and still could be the “Norwegian airlines” of that route though. If they don’t do it, JetBlue will take that market from the other direction.
GSTP is ballin’ now.. VS just linked this page in their recent email they sent out to all FC members
I read with interest this announcement and the comments above and have a specific reason for posting my comment, which is to get a response from VA to my outstanding flight refund claim.
I have always been a VA fan, but since a dream holiday to the US was cancelled on 27/5, I have had absolutely no contact from them regarding our claim for flight refunds. If VA are bothered about customer loyalty to help their airline survive, they need to get on top of their refund programme, to retain a chance of people like me flying with them again. So stop the automated text messenging, that responds to me from midnight to 2am, because US agents are dealing with the refund claim and use agents in the same time zone. Come on VA you can deliver better customer service. I bet if I wanted to book an alternative flight I’d get a call back straight away. Remember loyal customers remember how a company deals with them in a crisis and quite frankly right now you are not living up to your brand. All the hotels, car and RV hire companies that I booked directly have fully refunded all costs within 4 weeks, I even got a call from a senior manager at Motor Home Republic from South Africa to confirm my refund had been processed and when the money would be in my bank. I would re-book with them without question.
Come on VA, you can do better.
I get all of what you’re saying but what no one has raised is the question of refunds for cancelled flights, which is of great concern to a vast number of people. How does this affect that refund process? Also, for goodness sake why is it taking 4 months? I know there are a lot of refunds to process but it’s a pretty poor system that can operate so slowly.
I’ve flown Virgin Atlantic many times. Their Premium Economy offering is far superior to BA World Traveller Plus and the level of service on Virgin Atlantic is excellent and is again far superior to BA.
Like most world airlines Virgin Atlantic has its back to the wall right now, but I hope that they successful in filingb for Chapter 15 and then secure funding and ultimately see out COVID.
Personally I can’t wait to fly Virgin again, but am being cautious before booking. I too have a ‘load’ of air miles (collected over years using my VA Credit Card) but would willingly give them up if it were to secure Virgin Atlantic’s future. This business is a credit to our country and to the industry and simply has to fly the skies on a financially sound and on a long term basis.
Good luck to all at Virgin who are trying desperately to save this business.
PS – I guess the UK Government would be more willing to help Virgin Atlantic if Richard B had been more forthcoming in paying taxes to the UK Treasury, but that’s another subject and he’s not alone. I guess I’d do the same if I could get away with it.
Well said could not agree more VA are far superior to BA I hope they make it
VA has been my preferred carrier for 15 years and my heart wishes it every success as it tries to fight back from the deep slime of insolvency. But my business head tells me that it is in its death throes. I wish it weren’t so.
In view of all the comments on virgin Atlantic’s financial status I received my refund of flight to Atlanta. It took three months but I got it.
Where are you locatedand when did you first get in touch to process the refund? Was it a cancelled flight also?
Strategic move perhaps in line with a once steady transatlantic business. I’ve accumulated a lot of air miles with Virgin Atlantic and am glad that they are safe (for now; anyway.) Virgin has always been good to me and hope to fly with them again soon!
Virgin Atlantic has been the airline of choice for both my husband and I for very many years. We are now both retired, still been saving our points with the thought of making a very special trip to the Hawaiian Islands. Having read the email sent today, will continue to save points. Our thoughts, hopes and fingers crossed that Virgin can make it through these difficult times – and of course that we get to make our special trip. Staff always managed to make business trips enjoyable. Something other airlines did not.
I have already booked a flight thru Virgin to the USA west coast but could only get the flights i needed on Delta. At the time of booking (end of june) Virgin were not allowing any use/redemption of flying miles so i could not use any miles instead of money but this email/info pages states that miles can be redeemed on flights?
The person on the end of the phone when i booked with Virgin (Kyle)was great and helpful and i am so appreciative of his patience and determination too get me what i wanted.
And you are featured in the mail from Virgin Atlantic.
Who says hard work doesn’t pay? Keep up the great work!
It would be terrible if Virgin Atlantic disappeared they are so much better than BA and the staff are so much more friendly. I’ve got my fingers crossed that you make it through these troubled times and look forward to travelling with you again in the future. As a UK taxpayer I would be furious if the Government gave money to BA and not Virgin Atlantic. My thoughts are with all the staff who must be very worried at this time.
As a UK taxpayer I think the opposite. Necker Island and the US domiciled owners don’t pay a penny of corporate tax here. Support the taxpayers. That’s the German view too…
The German view that handed Lufthansa €9 billion with no strings attached?
Virgin Atlantic is a UK registered company and always has been. They pay taxes in the UK and always have done. The tax domicile and location of residence of the shareholders is largely irrelevant, the ‘problem’ is one particular shareholder is a very prominent public figure and attracts very polarised views in the court of public opinion. However, without this individual, the airline would never have made it last past the first couple of years either. The airline has generated hundreds of millions in tax take in the UK, VAT, income taxes of employees, (who in turn inject cash back into the economy), APD, all on top of corporation tax… Why do people always focus solely on the personal tax affairs of the Chairman? The money go round is so much more complex…
I wonder, does anyone know what percentage of IAG’s shares are owned by non-UK tax domiciled individuals? No? Or any other airline for that matter? If people don’t think that’s relevant, then that’s hypocritical.
On paper, BMI British Midland was stronger in the late nineties, and had 14% of the Heathrow slots at one point, but what they didn’t have was Sir Richard Branson. Their last foray into long haul was virtually invisible… In the USA “Who do you fly for then?” “BMI British Midland” “Be My What? British Amendment? Who?” In Brazil, a country that doesn’t even have a Virgin service as yet… “Who do you fly for?” “Virgin” “Ah yes Mr Branson, when will he come here?”
Virgin Atlantic was a healthy business prior to this hammer blow, and was expanding at a pace. I’ve bought tickets with other airlines too, state flag carriers, and I haven’t had a cash refund yet either, I’ve had a voucher. If everyone got their refunds in cash right now, the world’s airlines would virtually all collapse through a liquidity crisis, save for the few giants (many of whom have received eye-watering bailouts, such as Lufthansa…), and the subsequent lack of capacity and monopoly would end up costing us ultimately an awful lot more than the cash value of the refund we are waiting for.
We need to look at this rationally.
I hope they stay afloat. Whilst they are encouraging us to not cash in our miles, if they do go out of business these will be worthless. Mr Branson needs to personally guarantee he will reimburse these. I have over 100,000 which is a lot of money to lose! I’ve moved Tesco points to Virgin so won’t be happy at all if they are suddenly worthless. If we all ordered wine today to use them up they would have a problem!
I dont think it’s a good idea people harassing virgin atlantic for flight refunds considering the financial trouble they are in cant they do what I have done rebook a different date I am waiting for another 12 months before I fly to the usa I can wait sure other people could do the same they are not that desperate for money surely
I would very much hope things work out well for Virgin Atlantic as a regular passenger of this airline.
Richard Branson is one of the very few decent & honest business men that there are in the world. Where other airlines are so money minded and could not care less about “people” this guy has a heart. It is a shame to see the way financiers, the government and creditors are behaving towards this guy.
I very much hope that this most decent of entrepreneurs puts his hands to another profitable venture in the very near future if Covid 19 puts paid to the aviation industry.
Been flying Virgin for 25 years with 10 Virgin Holidays to Disney. I love this company who have always given the best levels of customer service. I have 325,000 miles and was planning upper class trips to the USA next year and more great holidays. I really hope they survive but it will be touch and go for all the airlines over the next 12 months !!
I have been flying Virgin Atlantic for almost 15 years now across the Atlantic to New York and Grenada. I don’t intend to change because their service and aircraft is far superior to what BA offers for the same price. I switched from BA because of their poor industrial relations policies and the disruption it caused on many occasions during the summer holidays with staff having to take industrial action. I also do not like the draconian way that Mr. Walsh responds to their grievances. Before you all jump on me, let me make it clear I am not a union representative, I am just someone that believe in fairness. Virgin’s premium economy is definitely far superior to BAs, I have experienced both. Virgin’s new economy delight with extra legroom is even better than BA’s premium economy and is a delight indeed. I presently have a flight booked and paid for to Grenada for December. If re-occurrence of covid-19 prevents them from flying then, I won’t be asking for a refund. To help my favourite airline in these troubled times I will just seek to rebook at a later date, God Willing I live to fly at a later date or my beneficiaries would receive the refund if the worse happens.
In view of the present circumstances, I believe we should be more understanding and not be ready to ask for a refund and moan to the press about how long it’s taking to get it. If we all drain the resources by asking for refunds there won’t be a nicer alternative to BA for us all to enjoy, whether the law says so or not. These are unprecedented times and a little give and take won’t kill anyone.
After all, we were all able to afford the holiday and would have spent the money and more had covid-19 not caused the disruption, postponing to a later date should not be difficult since no one can go anywhere at the moment. I wish Virgin Atlantic all the best with their endeavours to keep the airline flying. I also look forward to my next trip with them. All the best for the future.
I’m hoping to see my friend in new Smyrna beach Florida have booked 3 weeks to include Xmas and my birthday will be devastated if I can’t make as I have already cancelled a flight June this year
You can do it Virgin just believe, we believe in you.
Love you guys
I began flying VA back in June 1991 shortly after they began their first transatlantic flights from BOS to LHR/GTW and it is still the number 1 airline of choice for my family.
Even though the seats and aisles got smaller, the food went from yummy to gross and it wasn’t really a “fun” experience anymore the last few years. They are by far the best out there because of the people who work for them. I’m hoping beyond hope that they survive!!
I need VA to survive as I commute between Cuba ( where I have residency and live ) and the UK. VA are the only direct airline between the 2 countries. I am stuck in England and can’t return home.