Voluntary administration is similar to bankruptcy in the US.
Sir Richard Branson
Credit: Robin Marchant / Stringer via Getty

British billionaire Richard Branson has offered to put his private island up as collateral in order to save his Virgin Atlantic airline from collapse.

On Monday local time, multiple Australian media reports indicated that Virgin Australia, the Australian airline which Branson launched in 2000, was set to enter voluntary administration. Voluntary administration is similar to bankruptcy in the US. The airline formally announced that it had entered voluntary administration on Tuesday local time.

Virgin Atlantic has taken several cost-cutting measures in order to prevent collapse. The UK-based airline announced last month that it would ground 75% of its fleet by March 26 and would increase that number to 85% by some point in April. The airline said it would also ask staff to take eight weeks of unpaid leave over the next three months in order to avoid job cuts.

In an open letter to all of Virgin Group, Branson pledged his private Necker Island, which is located in the British Virgin Islands, as collateral to save Virgin Atlantic.

"As with other Virgin assets, our team will raise as much money against the island as possible to save as many jobs as possible around the Group," Branson said.

Branson owns the 74-acre island, which operates as a resort that can accommodate up to 30 guests.

The airline industry has taken a hit, as the novel coronavirus has led countries around the world to impose strict travel restrictions, causing demand for air travel to plummet. Several airlines around the world have faced new financial hardships, with some collapsing under the pressure.

Aviation experts have warned that many of the world's airlines could be bankrupt by May because of the coronavirus pandemic.

In his letter, Branson noted that Virgin Group operates within many of the industries hardest-hit by the coronavirus, including "aviation, leisure, hotels, and cruises."

"We have more than 70,000 people in 35 countries working in Virgin companies. We're doing all we can to keep those businesses afloat," he said.

Branson also addressed speculation that he could use his own personal wealth to pull the airlines off of the brink.

"I've seen lots of comments about my net worth — but that is calculated on the value of Virgin businesses around the world before this crisis, not sitting as cash in a bank account ready to withdraw," he said.

Branson is reportedly asking the British government for a loan estimated to be worth about £500 million ($621 million).

"Together with the team at Virgin Atlantic, we will do everything we can to keep the airline going – but we will need government support to achieve that in the face of the severe uncertainty surrounding travel today and not knowing how long the planes will be grounded for," he said.

He stressed that the money would come in the form of a commercial loan and "wouldn't be free money."

"The airline would pay it back," he said. "The reality of this unprecedented crisis is that many airlines around the world need government support and many have already received it."

In a letter to Virgin Australia staff on Tuesday local time, Branson said the news of the airline's bankruptcy was "devastating."

"In most countries, federal governments have stepped in, in this unprecedented crisis for aviation, to help their airlines. Sadly, this is not the case for Australia," he said.

Still, he pledged to work with investors and the government to get the airline back and running.

"This is not the end for Virgin Australia and its unique culture," he wrote. "I want to assure all of you — and our competitor — that we are determined to see Virgin Australia back up and running soon."

Virgin-linked Flybe Airlines entered voluntary administration last month. A spokesperson said the airline's financial difficulties were to blame for its demise. Flybe had been sold to the Connect Airways consortium in February 2019, which is backed by Virgin Atlantic and was set to be rebranded as Virgin Connect in 2020.