Aviation

IT’S OFFICIAL: Virgin Australia enters voluntary administration

Huntley Mitchell

Huntley Mitchell

After much speculation and deliberation, Virgin Australia has announced it has entered voluntary administration after failing to strike a deal with the federal government.

Virgin has appointed Deloitte to help restructure its $5 billion debt pile and recapitalise the business, after hiring Houlihan Lokey earlier this month to advise on how this process should play out.

The company noted that its frequent flyer program, Velocity, is not in administration.

Virgin said it will continue to operate its scheduled international and domestic flights that are helping to transport essential workers, maintain important freight corridors and return Australians home.

Deloitte’s Vaughan Strawbridge said the intention of the administrators is to bring the company out of administration as soon as possible.

“We are committed to working with Paul [Scurrah] and the Virgin Australia team, and are progressing well on some immediate steps,” he said.

“We have recommended a process of seeking interest from parties for participation in the recapitalisation of the business and its future, and there have been several expressions of interest so far.”

Virgin Australia CEO Paul Scurrah said the decision to enter voluntary administration was about securing the company’s future and emerging on the other side of the COVID-19 crisis.

“In 20 years, the Virgin Australia Group has earned its place as part of the fabric of Australia’s tourism industry,” he said.

“We employ more than 10,000 people and a further 6,000 indirectly, fly to 41 destinations including major cities and regional communities, have more than 10 million members of our Velocity loyalty program, and contribute around $11 billion to the Australian economy every year.

“Australia needs a second airline and we are determined to keep flying. Virgin Australia will play a pivotal role in getting the Australian economy back on its feet after the COVID-19 pandemic by ensuring the country has access to competitive and high-quality air travel.”

Virgin confirmed to workers that their entitlements such as leave will be preserved, and that they will continue to receive the JobKeeper payment while the company is in voluntary administration.

The government faces a potential entitlements and redundancy bill of $800 million if it allows Virgin to collapse.

The struggling airline had been in a trading halt on the ASX since last Tuesday, having extended the pause on Thursday to buy some more time for either the government or outside investors to come to the rescue.

Virgin had originally proposed a $1.4 billion bailout from the government to help survive the impact of COVID-19.

However, given $165 million worth of funding had just been allocated to help keep Virgin and Qantas flying domestically, on top of the $715 million relief package for Aussie airlines announced last month, as well as a $300 million lifeline for the regional aviation sector, it seemed unlikely that the government would offer specific financial support to Virgin.

Adding to this doubt were the comments of Prime Minister Scott Morrison, Deputy Prime Minister Michael McCormack and Treasurer Josh Frydenberg to the media about the government’s desire for Virgin to be saved by private investors.

Two companies that have continually been speculated as potentially lining up a play for the airline were Bain Capital and BGH Capital.

It’s major shareholders – Etihad Airways, Singapore Airlines, Nanshan Group and HNA Group – passed up the opportunity to provide an equity injection, while Richard Branson’s Virgin Group, which owns just over 10 per cent of Virgin Australia, has remained silent throughout.

The Queensland government unsuccessfully attempted to bait the federal government into providing support for Virgin over the weekend with a conditional $200 million lifeline, and blasted the NSW government over news that it would provide financial assistance if the airline relocated its headquarters to Sydney.

There has been growing speculation that Virgin’s future may only be a domestic one, and that Tigerair will be no more.

The carrier suspended all international flying in March due to the impact of the coronavirus outbreak on travel, and announced it would temporarily stand down approximately 80 per cent of the company’s 10,000-strong workforce until at least the end of May.

Earlier this month, the carrier shrunk its domestic capacity to a daily service between Melbourne and Sydney.

Paul Scurrah was brought in to replace John Borghetti as CEO of Virgin in March last year, and had already enacted a number of cost-saving and strategic measures designed to drag the company out of its loss-making ways.

These included the cutting of 750 jobs across the group, major fleet and network reductions and its acquisition of Velocity Frequent Flyer.

SEE WHAT PEOPLE ARE SAYING

Leave a Reply

Wholesalers

Wholesaler Wrap: Travelmarvel opens bookings for Canada and Alaska, Explore’s refund promise + MORE

Looking for a way to get your working week off to a flyer? The latest Wholesaler Wrap is here to provide that kickstart you’re after.

Share

CommentComments

Destinations

Man dies after falling down cliff during bushwalk in Queensland

by Huntley Mitchell

A 32-year-old man has tragically died after falling down a cliff while bushwalking in Queensland’s Scenic Rim region.

Share

CommentComments

Technology

TMS Talent diversifies with new acquisition

The global recruitment firm has gone and stuck its finger in another pie with the announcement of a new acquisition.

Share

CommentComments

Aviation

Here’s what it’s like flying domestically during COVID-19

by Ali Coulton

Ease your clients’ worries by knowing exactly what they can expect when flying domestically during the COIVD-19 pandemic.

Share

CommentComments

Destinations

Destination Wrap: New industry toolkits for NSW, Abu Dhabi’s Specialist Program success + MORE

It’s been a big last few days of destination-related news. Get up to scratch here with your favourite source.

Share

CommentComments

Aviation

Cap on international arrivals introduced to ease pressure on hotel quarantine systems

by Christian Fleetwood

Australia is set to see a lot less aviation activity from overseas, as National Cabinet tries to ease the quarantine burden being carried by hotels.

Share

CommentComments

Tourism

Global travel association ceases operations

Travel Weekly doesn’t enjoy being the bearer of bad news like this, so we’ll forgive you if you decide to skip over this story.

Share

CommentComments

Destinations

Why now is the perfect time to become an Amazing Thailand Specialist

by Sponsored by Tourism Authority of Thailand

While Aussie travellers can’t take a holiday to Thailand just yet, that doesn’t mean travel agents should put off educating themselves about the popular Asian destination.

Share

CommentComments

Aviation

Virgin christens Brisbane Airport’s second runway as borders reopen

Virgin Australia had first dibs on Brisbane Airport’s new runway over the weekend, kicking off a special celebration of Queensland’s aviation history.

Share

CommentComments

Cruise

Ponant’s Monique Ponfoort to lead Aurora Expeditions

A novelty-sized leaving card for Monique Ponfoort has started doing the rounds at Ponant HQ off the back of this announcement.

Share

CommentComments

Aviation

Virgin drops more than half a million Queensland airfares from $85

While its sale to Bain Capital is not yet set in stone, Virgin is still taking it to Qantas with a huge sale.

Share

CommentComments

Travel Agents

Agent Wrap: New AFTA chief mingles, Tripadvisor trials customer-to-agent service + MORE

It’s finally Friday! Or, as we call it in the Travel Weekly office, Agent Wrap day. We also like to call it Wineday.

Share

CommentComments