iscover
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:
Rod Pickin
says:When I first read about the blocking of VOZ A/C at PER I thought maybe the exec ordering such a move had been recently transferred from CBR. – however the fact that the airline is in administration makes me think that action not to be kosha. The claimed debt owing to that service provider, a staggering $16m, – WOW, either the bill has been outstanding for an extended time or, the charges per service way too high, some explanation would be nice. Sadly though, over the weekend reading about some VOZ A/C being “parked at PER, with and or without some parts” makes me think, Ansett all over again and now we have ADL in the act. Under the circumstances, we need urgent advices from the administrators as to their accurate assessment of the situation and any move forward available.
Mike
says: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.
This is just bad excuse as no difference will be on the asset value, flying or not, the age will determine that value and after that flown times/cycles might influence this price but in reality does not matter!
After all, it is pity that VIrgin has to go down but this airline was in bad shape pre COVID-19 time and CEO and his board could not manage for years to restructure the company!
Bernard
says:The major shareholders who allowed such high debt levels needs a good kick in the arse. Also don’t come crying for handouts especially those major shareholders who benefit in some way from the lease setups-whether a kickback, over valued or over priced leases favourable to everyone but Virgin Australia. I’m over it-bury the Virgin name for good too whilst you’re at it as the name has become a liability in my view.
Ray B
says:Isn’t Perth Airport in some sort of dispute with Qantas regarding unpaid invoices as well? Why haven’t they impounded some Qantas aircraft as well?
Craigy
says:According to Flight Global, the cirium database list 75 of Virgin’s aircraft as leased, including 5 widebodies.
So now the debt is 6.8 billion not 5. Was Virgin being honest in its public statements prior to administration or has it taken a proper audit to determine the full debt?
As for Perth airport, if the planes haven’t flown for some time, whats the point? Grandstanding no doubt by the airport’s management.
Jacob
says:The aircraft that are blocked on the tarmac don’t fly they all need maintenance Perth airport is giving them a favour
Andrew Ferguson
says:Hi Craigy;
Virgin was being honest about its debts a it indicated that its debts were $4.4 Billion. That is $AUD 6.6 Billion. Basically it has always stated costs in USD not AUD
andrew ferguson
says:Hi Ray B; I believe the difference with Qantas is that they are paying their bills (except for Terminal Access fees and Lounges). These bills have not been paid for some time and the reason why Qantas has not organised much heralded non stop flights from Perth to Paris, Frankfurt, Athens, Berlin and Amsterdam until they get their way for al Perth domestic and international flights to operate rom the same terminal. Thos negotiations have been going on for many months. With no resolution.