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Virgin Australia has finally confirmed to the ASX that it has entered voluntary administration.
Its board has appointed Deloitte to handle the process, but this will not include Velocity Frequent Flyer, which is a separate company.
The airline will continue to operate its scheduled flights, including those underwritten by the government in order to help Australians return home after spending time in hotel quarantine.
Virgin Australia Group’s chief executive, Paul Scurrah, said, “Our decision today is about securing the future of Virgin Australia Group and emerging on the other side of the COVID-19 crisis.
“In 20 years, Virgin Australia Group has earned its place as part of the fabric of Australia’s tourism industry. 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 vital role in getting the Australian economy back on its feet after the COVID-19 pandemic by ensuring the company has access to competitive and high-quality air travel.”
The news was first reported last night, when both The Sydney Morning Herald and The Australian Financial Review revealed a crunch board meeting concluding that it was “near impossible” to make any other decision.
The airline was seeking a $1.4 billion loan from the federal government before switching its attention to securing help from a number of states and territories.
Speculation will now swing as to who could save the company, now it has been freed of many of its debt obligations.
The company’s current shareholders include Singapore Airlines, China’s HNA Group and Nanshan Group, Etihad and Richard Branson’s Virgin Group, which together hold 90 per cent of the company.
TWU national secretary Michael Kaine said, “If the federal government does not move to save Virgin, the Prime Minister must explain why Virgin workers don’t matter. Why don’t their families who depend on them matter?
“This is a terrifying moment for thousands of Virgin workers. The airline has two decades of providing decent jobs, a safe working environment and excellent service for the travelling public. It is a viable and much-needed business and without it Australia will struggle to get its economy back on track once the crisis abates.
“There is still time for the federal government to work on an investment plan to get through this period of crisis and taxpayers will get a double benefit. The government will retain a competitive aviation market and they will get a return on their equity stake.”
Meepa
says:The writing was on the wall! If you did not see this coming you are sadly “wilfully ignorant”.
It shows the complete shambles of the previous management who ran the airline into a highly leveraged position all why taking huge pay and bonuses. Shameful.
Dont forget, the small siblings of Tigerair and VaNZ who were just sacked with short notice and NO real help from Scurrah. They planned it, and thats ok too but nobody seems to remember the subsidiaries who got a very raw deal, with NO chance of reemployment really.
I believe the market will come to the rescue and at some point I hope Virgin gets renamed and the old gaurd of Branson etc are moved on. After all, it was Branson and the cohort that put all of the staff at Tigerair and VaNZ on the unemployment line.
Maybe next time, the management will not go down the path of PC policies and actually run an airline! Get Woke, Go Broke.
Oh, and the Qantas will raise prices argument, is only partially true. It will happen, but Virgin did that too! But remember that the backlash of the public after this crisis for an airline to raise fares to much will be monumental, so I believe that it wont happen as much as the crowd thinks!
Chris
says:I hope the the anti Virgin Australia are happy. Personally, I would have thought that the federal government could have given the airline’s requested bail out. I hope the administrators will relaunch the airline as lean nimble domestic and hopefully international carrier.
Colin Nicholls
says:Why don’t the majority share holders explain why its the Australian Government, and not they, who have to bail out the airline. They after all are the one’s who have overseen the poor management and decision making. There are still 2 Australian airlines operating one of whom is a low cost carrier and to the best of my knowledge Jetstar is an entirely separate entity even though it’s owned by Qantas.
Rich
says:Argh what has happened to the reporting quality at AA… it’s just like reading a google news feed.
Clive Milward
says:To the VA shareholder leaders, Branson, Singapore Airlines, Etihad, Hainan airlines and Nansham, what measures did you make to stem 7 consecutive years of losses and how did it come to allowing Virgin Australia accumulating 5bn in liabilities? And now you want the Australian Government to lend 90% foreign owned VA 1.4 bn. No doubt you would be back for even more as losses continue. VA has deviated from the initial model of a one type aircraft to 5 types and serving too many ports that do not make economic sense. Would be cheaper to let VA slide and start a new carrier with a one type plane, serving fewer ports that make fiscal sense , with no past 1.5 liabilities and hiring retrenched VA staff. What potential investors would pour funds into a company with 5 bn liabilities? Sir Richard, how did the financial state of VA come to this because the root causes were deeply embedded prior to this pandemic.
Adrian P
says:It started to go wrong when Virgin Blue decided to go QANTAS mark 2. The value of the Virgin branding did not justify the cost of using the logo. An opportunity for Western Australia, South Australia and Northern territory to start a new airline with 20% equity each plus 40% private equity to provide services that the east coast Virgin and QANTAS have no interest in developing.
Lhano Martins Xavier Junior
says:I am happy for Virgin Australia, not for ceasing operations, but for a group of 10 entrepreneurs to decide to recapitalize the company.
Seriously speaking, I think the amount to recapitalize may be much less than the calculated amount (but that’s what I think). Why do I think that?
The inputs and prices will certainly be others passed on to COVID-19. For example, the oil price today has reached a low level which makes the price of fuel and products that depend on oil become cheaper, this is not only the case with oil but with everything, everything.
I do not know what this equation will be like, I have no idea, but if all prices go down, the ticket price will also go down. All prices in the world will go down and those who do not go down will fail. When I say that all will go down will be everything even your salary, and be happy if it goes down that it is much better than being fired.
I would be very happy to see that this happens not only in Australia, but worldwide.
All companies need help, on all segments in all markets, regardless of industry.
I hope this is a light at the end of the tunnel, and that this light is not the headlight of a train.
AlanH
says:I’m totally with you Clive. Where are VA’s owners/backers? They know that there is no point in pouring money into a dead horse. You can kick it, whip it, pour water on it, try to feed it, but it still won’t get up and run. Poor management decisions (e.g. TigerAir and international flights) have brought them to their knees. They need to rethink their role and get back to basics as a 2nd-string domestic airline with an added regional focus. B737s and ATR 72s only folks, nothing else!
Linda Weaving
says:I am happy to see a company go broke that, if it did make profits, would send most of it to China and Saudi Arabia, human rights abusing dictatorships, whilst branding themselves as ‘Australian’ & begging for free handouts out of MY taxes because management are incompetent. I sincerely hope they dissapear from our skies.