Virgin Atlantic filed for Chapter 15 bankruptcy protection in the United States yesterday. Should you be concerned about the airline going out of business and losing your miles? Not at this point.
Virgin Atlantic Files For Chapter 15 Bankruptcy
It’s all about the numbers. Most are familiar with Chapter 7 bankruptcy (liquidation) or Chapter 11 (restructuring). Chapter 15 is a bit different. It is a form of bankruptcy intended to promote efficiency and fairness for multi-national companies. Specifically, it allows non-US individuals or companies to file for bankruptcy in the USA even though assets are spread in several nations. This protects the assets of debtors while bankrupcty or other restructure proceedings take place in another country. You can read more about the nitty and gritty of Chapter 15 here.
Although Virgin has filed for bankruptcy in the USA, it has not done so in its home base in the United Kingdom…and doesn’t plan to. Instead, Virgin hopes to soon finalize a £1.2 billion ($1.57 billion) private rescue package with its main creditors. But in order to do so, it needs to know that other creditors will not try to seize assets that would prevent a meaningful restructure and hinder survival.
Virgin Atlantic warns that it will run out of cash by September. The carrier resumed transatlantic flights last month, but demand has been weak due to a second surge of cases spreading across the United States and now, albeit on a smaller scale, hitting Europe. As such, it is too early to foreclose the possibility that Virgin will not seek the equivalent of actual bankruptcy protection in the United Kingdom.
A Virgin Atlantic spokesperson said:
“Following the UK hearing held earlier today, ancillary proceedings in support of the solvent recapitalization were also filed in the US under their Chapter 15 process. These ancillary US proceedings have been commenced under provisions that allow US courts to recognize foreign restructuring processes.”
Know this: your Virgin Atlantic miles are still valid. Your award trips are still intact. In fact, you can still book new award trips. I’m not going to say Virgin Atlantic is immune from entering a more traditional bankruptcy model or even shutting down. But were are not there yet. Not even close. Virgin’s Chapter 15 filling in the USA was simply a chess move in its long game of survival.