Travel industry reacts to Virgin’s move into administration

Perth Western Australia October 10 2018: Virgin Australia Regional Airlines (VARA) Fokker 100 tail at Perth Airport in support of the fly in fly out FIFO mining industry

While it wasn’t necessarily a shock when Virgin Australia announced this morning it had entered into voluntary administration, the move has still prompted a response from various players in Australia’s travel industry.

Online travel company Webjet, which has been suffering its own financial woes of late, has assured investors it does not have a material financial exposure to Virgin should the airline’s administrators restructure the airline or elect to cease trading.

“Webjet books airfares on behalf of its customers as agent and is not the provider of the service,” the company said in a statement.

“Webjet is working closely with its customers and on their behalf to process refunds/credits directly with all airlines who are no longer able to honour prepaid tickets, including Virgin.

“While the travel industry will be impacted by COVID-19 for some time, Webjet considers that it will emerge with a strong competitive position given the diversity of geographic markets in which it operates, its diverse product offers and its capital position following the recent capital raise.”

Alliance Aviation Services, which has been a longtime partner of Virgin and currently has agreements in place for wet leasing, charter flights, and marketing and distribution, revealed it is exposed by between $250,000 and $300,000 as a result of the administrators being called in.

“Notwithstanding [Virgin Australia] entering administration, the flights operated by Alliance pursuant to the [marketing and distribution agreement] will continue. The current schedule consists of services between Brisbane, Gladstone and Bundaberg in Queensland.

The Transport Workers’ Union (TWU) has called on the federal government to meet unions representing Virgin workers to devise out a plan for the airline’s future, following its announcement this morning.

TWU national secretary Michael Kaine said it was imperative that the government developed a plan to approach administrators with and that the future of Virgin workers had to be central to that plan.

“We urge the federal government to sit down with the trade unions representing the 16,000 Virgin workers to work out a plan to go before administrators,” he said.

“The future of these workers and the options available to the travelling public are the biggest issues facing the government now that Virgin has entered voluntary administration.

“Unions stand ready to work with the government on helping to devise a solution on Virgin’s future to ensure good jobs, a decent reliable service for the public and a return for taxpayers.”

Kaine said there is still time to rescue Virgin and for the government to take a bold move to ensure that the Australian economy is ready to bounce back when the crisis abates.

“Governments around the world are taking the difficult decisions to protect their economy and jobs and we urge the Australian government to follow suit,” he said.

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.

Credit: iStock/zorazhuang

Simon Westaway, executive director of the Australian Tourism Industry Council, said Virgin’s shift into voluntary administration represents a further significant challenge for Australian tourism.

“This is also a historic but also difficult moment for Australian aviation and for thousands of airline personnel and many associated businesses that will be severely impacted. Those obviously also include in tourism,” he said.

“These are the most challenging of times. The uncertainty around what level of future lost volume of flights and seat capacity that came from a second airline group is obvious in its negative impact.

“The year is, however, no longer 2001 when Ansett first fell. Before the COVID-19 pandemic, Australia’s skies were statistically and arguably never busier, including record levels of domestic and international air travellers and tourism visitors.

“Australian airlines strongly competed within this environment. The future for our aviation market cannot be overly speculated as lacking opportunity.

Westaway said Australian tourism is best delivered in terms of its optimum performance, economic outputs and supporting one million direct local jobs and hundreds of thousands of tourism businesses when the nation’s aviation market continues to foster these outcomes domestically, regionally and internationally.

“It is logical and important that our Australian-based airlines maintain sustainable operations in order to help achieve this,” he said.

“It is also important that we oversee operating and regulatory conditions to ensure a strong sustainable and competitive Qantas Group into the future.

“This creates opportunity for whatever the future structure of Virgin Australia may ultimately become or for any future prospective Australian-based airline entrant that may emerge.

“Australian tourism and our greater visitor economy need ongoing support. That argument is only made even louder today.”

Tourism Accommodation Australia has warned the loss of one of Australia’s two national airlines would be a disaster for an already struggling hotel accommodation sector, particularly in regional areas.

The CEO of the nation’s top tourism accommodation body, Michael Johnson, said domestic tourism would be the quickest road to recovery post-COVID-19 and the two national airlines would be needed.

“Initially, as we eventually move out of the COVID-19 crisis, the hotel sector will be heavily reliant on domestic tourism, with international borders expected to be closed for many months,” Johnson said.

“There are very real fears an airline monopoly would take away the competitive edge needed to ensure corporate, conference and leisure guests are well catered for in our key recovery markets.

“Accommodation hotels in regional destinations in particular, such as Cairns, are heavily reliant on both Virgin and Qantas and the existing competition between both. The last thing they need is for a national carrier to collapse.

“All accommodation hotels have been hard hit by the impacts of COVID-19 with in excess of 300 closing across Australia in the last few weeks alone.

“We need to do all we can to ensure we don’t take another hit with a loss of a national airline like Virgin.”

Featured image credit: iStock/Andrew Hanlon

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