This isn’t the news travel, tourism and regional communities in Australia wanted to hear, but it’s been widely reported this afternoon that Virgin Australia will enter into voluntary administration tomorrow morning.
The coronavirus pandemic has decimated the airline’s short and long term business viability while it attempts to recoup its jumbo $5 billion of debt.
Since the effects of the pandemic began and 125 planes were grounded in late March, the airline has stood down 8,000 staff without pay, gone into a trading halt and only started flying limited domestic routes again last Friday after a combined $160 million support package was given to Qantas and Virgin.
Despite asking the Federal Government to bail them out to the tune of $1.4 billion, no commitment has been forthcoming, with the only genuine offer to date being from the Queensland Government.
Last weekend the Queensland Government offered to put in $200 million to help, accompanied by their own conditions including keeping Virgin’s headquarters in Brisbane, maintaining regional flights and affordable airfares and ensuring the reminder needed ($1.2 billion) was met by the Federal Government.
The hope was that it would spur other states and territories into action to put pressure on the government and recognise the economic value of having two domestic carriers service their own areas of Australia.
Instead, the New South Wales Government said they were considering a rival package that would stipulate that the airline move its headquarters to the new airport being built at Badgerys Creek in western Sydney.
Cue Queensland’s state development minister, Cameron Dick, who told NSW to “back right off”.
Sadly, neither offer, genuine or not, will be enough to help Virgin now.
The number two Australian airline’s other five significant shareholders who own over 90% of Virgin Australia are also believed to be reluctant to invest further for a variety of reasons.
Etihad Airways owns 21% while Singapore Airlines, China’s Nanshan Group and HNA each own approximately 20%. Sir Richard Branson’s Virgin Group owns 10%.
According to the Sydney Morning Herald, ‘Several private equity firms are already sniffing around Virgin looking to potentially buy the business out of administration, which will see some of its debts wiped and aircraft leases renegotiated.’
It’s believed Virgin Australia had already appointed accountancy firm Deloitte to assess restructuring options. Deloitte is now expected to manage the administration process, which will include attempting to find some new owners to keep it flying.
Rumours are running hot with China Southern Airlines, East Airlines and Air China all believed to be considering bids. If one of them were to be approved, it would mean that Virgin Australia would be 100% foreign-owned.
The twenty-year-old airline had been recently campaigning heavily with a ‘Let’s keep the air fair’ campaign for the last two weeks to highlight the effect a Qantas Group monopoly will have in Australia.
Virgin currently employs around 10,000 people directly and supports another 6000 jobs indirectly. Its international operations were scheduled to resume on June 14, 2020.
Details for people with a Virgin credit or future booking will come to light in the coming weeks once the company confirms voluntary administration with the administrators (Deloitte) likely to contact individuals to communicate the next steps.