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Worthless Air Australia leaves backers out $90m

written by australianaviation.com.au | March 1, 2012
Air Australia's collapse has left passengers, employees and creditors all holding worthless promises.

The extent of the Air Australia debacle became clearer on Wednesday when it was revealed the failed budget carrier had just $442,000 in the bank and up to $90 million in debts when its house of cards collapsed on February 17.

The airline’s abrupt end stranded some 4000 travellers overseas, and it now appears clear that it will leave its 500 creditors holding the bag. During a creditors meeting in Brisbane on Wednesday, administrator Mark Korda reportedly said the airline had only about $1 million in assets. The carrier’s jets, terminal space and offices had all been leased.

ANZ Bank was the largest creditor to the airline, with the airline owing it $20 million.

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Korda also revealed that the airline had propped up its failing business by taking in $36 million from the forward sale of 100,000 tickets that are now completely worthless. Korda said his firm, KordaMentha, was continuing to investigate whether the airline traded while insolvent.

Air Australia owner Michael James did not attend the creditors meeting on Wednesday. Beyond an angry text message lashing out at The Courier-Mail newspaper, James has not been heard from publicly since the airline collapsed.

Air Australia’s 354 employees will likely be out $3 million of the roughly $8 million in entitlements they were owed by the airline, with the remaining $5 million coming in only thanks to a government compensation scheme.

Korda said the airline’s losses had been “horrendous” and that a sale was “highly unlikely.” Creditors will meet again on March 23 and are likely to vote to liquidate the little that remains.

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6 Comments

  • ron

    says:

    As tragic as it all is, we needn’t feel too sorry for the ANZ Bank. It probably would have sold off its loans much earlier via a derivatives package to down-stream investors, which means the bank gets all its money back upfront & in full. It’s the hedge funds, merchant banks & super funds that will feel the pain.

  • John

    says:

    I think it says a lot that the gutless and clearly totally incompetant CEO hasnt even shown his face to the public. When XL Airways went bust in the UK the CEO appeared on TV and a press conference to answer questions. I also find it hard to stomach that he was partying in Honolulu and leasing in aircraft whilst making continual losses month after month.
    I hope this CEO is properly investigated and pays for this mess. This man arrogantly went on Television at every opportunity prior to this collapse and now goes to ground. We thoughtnit was bad when SkyAirworld went bust it appears this was worse?

  • Neville Rees

    says:

    When are the people responsible for the losses to the everyday Australian going to pay for their irresponsible leadership, lies and misrepresentation. Thousands of everyday Australians have put their trust in this Airline but just as much in the travel agents (mine was The Holiday Centre) that have supported (propped up) this airline with advanced bookings and the taking of our money. There should be some form of class action law suit taken out against Michael James and the travel agents (The Holiday Centre) who have deliberately preyed on the hard earned dollars of thousands of Australian would be travelers.

  • Jake

    says:

    I note michael james has already been selling assets his house through ray white bulimba and moving cash off just weeks before the collapse. What a shame he, David Blake and vasta guy will not be asked to front the media now after they obviously craved the spotlight over the years. Do a google search on their names and you will find some interesting history there regarding employment credentials and favors promised frm new employees.

  • Martin

    says:

    A haunting reminder on New Zealands Kiwi air. People with big ambitions without the business acumen or blinkers on in a already shrinking competetive market. There are already code sharing agreements booking and paying one airline for return tickets flying on the original carrier and back on another unknown carrier until you get on the plane. You only have to look out the window at most airports and see a plethora of insiginias from the many airlines. So many start up costs and bigger operating costs from less of a margin of fuel to increased landing costs. Maintenance who through and last in the priority que and heavy cost. So many other business issues to contend with from marketing through to bidding for international landing rights and the list goes on. I agree that the CEO wimped out and what the hell was ANZ doing? Two big no’s in the lending world – do not lend to airlines or used car importers. They live in another planet not our world.

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