Richard Branson's Virgin Atlantic is the second Virgin airline to declare bankruptcy as pandemic rips apart the industry (DAL)

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Virgin Atlantic filed for Chapter 15 bankruptcy in New York on Tuesday, becoming the latest airline forced into reorganization during the coronavirus pandemic.

Virgin Atlantic was the second Virgin Group airline to file for bankruptcy protection. Virgin Australia filed for voluntary administration — a form of bankruptcy in Australia — in April.

London-based Virgin Atlantic, which is 49% owned by Delta Air Lines, flies exclusively long-haul international routes, and suspended all passenger operations in April due to the coronavirus pandemic. It began flying passengers again in July.

Chapter 15 is a form of bankruptcy designed for cases that involve multiple countries. It provides a mechanism for foreign-based companies undergoing bankruptcy proceedings in their own country to access the US court system. It effectively protects Virgin's US assets from creditors as a UK court oversees claims.

"One of the most important goals of chapter 15 is to promote cooperation and communication between US courts and parties of interest with foreign courts and parties of interest in cross-border cases," the US court system says on a website explaining the system.

In May, Virgin Atlantic said that it would cut more than 3,000 jobs and close its base at London's Gatwick airport, consolidating operations at London Heathrow to try and cut costs. The airline also retired its iconic Boeing 747-400 fleet as a cost-saving measure.

US and European airlines saw a modest recovery in travel demand in May and June, but the vast majority was for domestic travel. The trend has since reversed in the US due to ongoing spikes in COVID-19 cases.

For Virgin Atlantic, which operates long-haul flights through its UK hubs, options during the pandemic have been scarce. The airline had planned to build up an domestic network through its acquisition of regional airline Flybe in 2019, but the smaller carrier became the first airline victim of the pandemic when it collapsed in early-March. 

The airline had announced a £1.2 billion ($1.57 billion) private rescue package in July, but had not finalized the agreement.

The airline said during a London court hearing earlier on Tuesday that it would effectively run out of cash in September, Bloomberg reported. Tuesday's US filing appeared to be linked to the London hearing, at which a judge gave the go-ahead for a meeting allowing creditors to vote on the restructuring plan.

The airline had previously appealed unsuccessfully for a bailout from the British government. Branson has offered his private island as collateral for a bailout or loan.

Delta CEO Ed Bastian has said that Delta would not offer a cash injection to save Virgin from a possible bankruptcy restructuring. UK foreign ownership laws would prevent Delta or any other foreign investor from increasing its stake.

Virgin Atlantic and Delta did not immediately respond to a request for comment.

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