Perth Airport has impounded four Virgin Australia aircraft with heavy machinery as it seeks to recover $16 million in outstanding invoices for airfield and terminal charges.
It comes as Deloitte administrator Vaughan Strawbridge revealed the airline’s total debt is $6.8 billion – far higher than previously reported.
Creditors include 50 aircraft lessors, across 69 planes, owed $1.88 billion; 26 lenders with secured loans of $2.28 billion; and unsecured bond holders owed $1.98 billion.
Strawbridge told the Federal Court on Friday that working through those contracts constitutes a “very significant task” given the “ongoing uncertainty” around the nature of the leases and obligations.
The revelations cap a dramatic weekend for Virgin Australia Group as full details of its debts and obligations were finally put in the public domain.
On Friday, Perth Airport confirmed it had used company vehicles to block aircraft, which it said it had taken as security. Footage and images captured by the ABC showed a front-end loader and airport cars blocking planes on the tarmac, something the business called “standard practice”.
“The aircraft affected are not being used for current FIFO or interstate operations and have been parked at Perth Airport for some time now,” it said in a statement. “There will be zero impact on the state’s resources sector.
“At this point in time, we continue to facilitate Virgin’s FIFO flights through T2 while we try to secure an agreement with the administrators. Virgin continue to fly around 180 flights a week through Terminal 2.”
"It's a standard practice for debt recovery. It sounds dramatic but it's actually very normal," @PerthAirport CEO Kevin Brown tells @GeoffHutchison on Drive.
The airport is using heavy machinery & vehicles to block four @VirginAustralia planes, over unpaid debts. #perthnews pic.twitter.com/Ux1LJiFWZJ
— ABC Perth (@abcperth) April 24, 2020
Meanwhile, Strawbridge revealed aircraft lessors make up the third biggest group owed money. The airline group leases about half its fleet, or 69 aircraft, from companies such as including AerCap, Dubai Aerospace Enterprise, the Industrial and Commercial Bank of China, Pembroke Aircraft Leasing and Jackson Square Aviation.
Pembroke raised concerns that it would not get paid for Virgin’s use of its Airbus 320, which has been flying since administration between Perth and the Pilbara mining site.
“Aircraft which are being flown … will further depreciate in value as compared to aircraft that are simply grounded,” lawyers from Standard Chartered said in a court email.
Closer to home, the business’ 9,000 employees are owed $450 million in entitlements; 1,070 trade creditors are owed $166 million; and a group of 81 landlords are owed $71 million.
Virgin does have some aces up its sleeve: the process of entering administration means it can now effectively rip up leases it does not want, while the coronavirus crisis means lessors are struggling financially, too, and have few options.
The airline group confirmed its collapse last week. After the announcement, Deloitte administrator Vaughan Strawbridge and Virgin chief executive Paul Scurrah revealed more than 10 parties have expressed interest in recapitalising the company, which they described as being “very sophisticated parties”.
For more of our in-depth coverage, click the links below:
- Velocity Frequent Flyer points have been paused, but won’t be cancelled;
- Sir Richard Branson hits out at the Australian government as he pays tribute to Virgin staff;
- The TWU and opposition urges the government to make a ‘bold’ move to save the airline;
- Chief executive Paul Scurrah has revealed more than 10 parties have expressed interest in recapitalising the company.
- Australia’s states have entered an apparent bailout bidding war to help Virgin Australia – on the condition the reborn business shifts its base away from Brisbane.