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Velocity Frequent Flyer owner pursues Virgin for $150m

written by Adam Thorn | April 28, 2020
A file image of Virgin Australia Boeing 737-800 VH-YIR at Auckland Airport. (G B_NZ/Wikimedia Commons)
A file image of Virgin Australia Boeing 737-800 VH-YIR at Auckland Airport. (G B_NZ/Wikimedia Commons)

The company that operates Velocity Frequent Flyer is to pursue Virgin Australia as a creditor to recoup a $150 million loan extended in 2014.

The Australian Financial Review also reveals Velocity Rewards will be seeking $10 million worth of pre-bought seats set aside for frequent flyer members.

It comes as administrator Deloitte is set to appoint Morgan Stanley to oversee the airline’s sale, and more details have emerged on potential frontrunner Indigo Partners.

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Velocity Rewards told the newspaper in a statement that it still hopes to have a strong relationship with the airline moving forward, but that it had a legal duty to seek the money it’s owed.

“Velocity has always had a strong partnership with Virgin Australia, and it’s our hope that this is able to continue well into the future,” a spokesperson said.

“The Velocity Frequent Flyer program has always had a trust to protect the interests of members. The independent trustee, Velocity Rewards Pty Limited, has general fiduciary duties which exist as a matter of law and a governance structure that includes an independent director and policies directing how trust funds can be invested.”

Meanwhile, adviser Houlihan Lokey will work with Morgan Stanley to oversee any sale, and the team will be familiar with the situation as they were approached by the business before administration to find a rescue package.

PROMOTED CONTENT

Finally, American airline investor Indigo Partners, thought to be one of the frontrunners to save Virgin, actually came close to a controlling stake 18 months ago.

The Sydney Morning Herald revealed on Tuesday morning that it agreed to buy a 20 per cent stake from Chinese conglomerate HNA, but pulled out after being unable to buy out fellow shareholders Eithad and Nanshan.

Indigo was said to want full control in order to be able to make changes to the company.

Other shareholders include Singapore and Sir Richard Branson’s Virgin Group.

Yesterday, Australian Aviation reported that Perth Airport had impounded four Virgin Australia aircraft with heavy machinery to help it recover $16 million in outstanding invoices for airfield and terminal charges.

It came as Deloitte administrator Vaughan Strawbridge revealed the airline’s total debt is $6.8 billion – far higher than previously reported.

The airline group confirmed its collapse last week. After the announcement, 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:

8 Comments

  • Rod Pickin

    says:

    My view may well draw scorn from some quarters but, if an Australian organisation cannot be found to secure ownership and operating rights for VOZ then the company should be de-listed from the ASX and the assets “materialised”, then back to the drawing board. Failure to secure such local controls means we would be exposed to the same problems in the future, ie. no change = no change. It is pertinent to note that Sir Richard is reported to be looking for a buyer for the balance of his ownership in Virgin Atlantic and I doubt if he would assist VOZ further. Reports also ponder the possibility of Alliance Hldgs. (AQZ) rising but although they have top management, not enough cash and the major shareholder there is QF. My preference would be for Singapore and Etihad to retain their holdings, the Oz markets to secure the remaining approx 60% inc. tricky dickies but retain the brand name but at a much reduced premium $ cost. Key serah serah

    • Jason

      says:

      How about ‘que sera sera’?

      Yes, could possibly go into Liquidation to enable starting afresh, from the ground up.

      But scrap its’ original name. Waste of $15M annually paying Branson for it.

  • AgentGerko

    says:

    Love to know how an independent trust with independent directors approved a $150 million loan to an airline that was clearly losing money at the time. Doesn’t sound too independent to me. As for Indigo partners, my concern is that they buy/operate ultra low cost carriers and I wouldn’t like to see VA turned into a Tigerair 2.

  • Marum

    says:

    @ROD P. I have little knowledge of how to run a large airline. The engineering/deign/maintenance is my Forte.

    I have however noted, that most businessmen are only thinly disguised crooks. (This comes from a lifetime of dealing with them) Most of them will never pay a bill that they can get out of paying. I nowadays make my living as an investor, and this has only reinforced that view.
    Virgin Airline has been a financial black-hole for years. There is no gain in just rescuing it – as you noted. It needs a complete change fro the ground up. NOT JUST A REVAMP. As you also noted regarding change, I will put in engineering terms: —– 0 x infinity = 0. (where infinity = the amount of cash/subsidies poured in)

    We are sure living in “interesting” times.

    Regards….Marum.

    PS. I hope my HTML instructions for italics and bold respectively, work on this site.

  • Andrew M

    says:

    Indigo Partners in full ownership is likely (not necessarily) to mean:
    1. Conversion back to an LCC. Actually closer to the ULCC end of the airline model spectrum;
    2. Conversation of fleet to Airbus. Indigo Partners has a large order of the A320/1 family (600+ aircraft).

    Interesting times.

  • Rod Pickin

    says:

    Hi Marum, great to read your comments! frankly I can’t wait to see the end result of this saga; to me the main point of interest will be, who will have control of the enterprise and does the incumbent/s have the required skills. Frankly I am not in favour of Private Equity groups involved in such an industry which is truly quite sophisticated in its operation and let’s face it, quite political too, the business really needs more than heaps of cash. Much as I admire the acumen of “Twiggy”, I find his apparent fascination with China well, maybe not the required flavour at this time. Westfarmers, WES, yep very successful, profitable, top management but aviation? I would be very interested at this time to hear from a couple of well respected industry folk as to their thoughts and vision if any for VOZ’s rebirth; – Sir Ron Eddington and
    Brett Godfrey. Like everything else in our lives at the moment, it will take ages to recover and in the case of VOZ, it will not be the same, different but not the same

    • John Butler

      says:

      Really Eddington. Raped Ansett to the stage they owned nothing, sold ANZ a pup. BA – sacked 4,500 staff to get the books back into the black and a Knighthood. No, their are far smarter people out there that do show compassion for their workers.

  • Anthony

    says:

    Even though it’s nearly $7bn in debt, what hasn’t helped it, is Branson wanting $millions’ each year, just for the name to be used.
    An excellent case of ‘money for jam’.

    Hovering vultures, picking at its’ carcass, will not ‘resurrect’ it.

    It needs a ‘cruel to be kind’ approach, of liquidating it, & start afresh, with a much more well managed Company operating, if there’s to be any hope of a second Domestic Airline in Australia.

Leave a Comment to Andrew M Cancel

Your email address will not be published. Required fields are marked *

Velocity Frequent Flyer owner pursues Virgin for $150m

written by Adam Thorn | April 28, 2020
A file image of Virgin Australia Boeing 737-800 VH-YIR at Auckland Airport. (G B_NZ/Wikimedia Commons)
A file image of Virgin Australia Boeing 737-800 VH-YIR at Auckland Airport. (G B_NZ/Wikimedia Commons)

The company that operates Velocity Frequent Flyer is to pursue Virgin Australia as a creditor to recoup a $150 million loan extended in 2014.

The Australian Financial Review also reveals Velocity Rewards will be seeking $10 million worth of pre-bought seats set aside for frequent flyer members.

It comes as administrator Deloitte is set to appoint Morgan Stanley to oversee the airline’s sale, and more details have emerged on potential frontrunner Indigo Partners.

Advertisement
Advertisement

Velocity Rewards told the newspaper in a statement that it still hopes to have a strong relationship with the airline moving forward, but that it had a legal duty to seek the money it’s owed.

“Velocity has always had a strong partnership with Virgin Australia, and it’s our hope that this is able to continue well into the future,” a spokesperson said.

“The Velocity Frequent Flyer program has always had a trust to protect the interests of members. The independent trustee, Velocity Rewards Pty Limited, has general fiduciary duties which exist as a matter of law and a governance structure that includes an independent director and policies directing how trust funds can be invested.”

Meanwhile, adviser Houlihan Lokey will work with Morgan Stanley to oversee any sale, and the team will be familiar with the situation as they were approached by the business before administration to find a rescue package.

PROMOTED CONTENT

Finally, American airline investor Indigo Partners, thought to be one of the frontrunners to save Virgin, actually came close to a controlling stake 18 months ago.

The Sydney Morning Herald revealed on Tuesday morning that it agreed to buy a 20 per cent stake from Chinese conglomerate HNA, but pulled out after being unable to buy out fellow shareholders Eithad and Nanshan.

Indigo was said to want full control in order to be able to make changes to the company.

Other shareholders include Singapore and Sir Richard Branson’s Virgin Group.

Yesterday, Australian Aviation reported that Perth Airport had impounded four Virgin Australia aircraft with heavy machinery to help it recover $16 million in outstanding invoices for airfield and terminal charges.

It came as Deloitte administrator Vaughan Strawbridge revealed the airline’s total debt is $6.8 billion – far higher than previously reported.

The airline group confirmed its collapse last week. After the announcement, 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:

8 Comments

  • Rod Pickin

    says:

    My view may well draw scorn from some quarters but, if an Australian organisation cannot be found to secure ownership and operating rights for VOZ then the company should be de-listed from the ASX and the assets “materialised”, then back to the drawing board. Failure to secure such local controls means we would be exposed to the same problems in the future, ie. no change = no change. It is pertinent to note that Sir Richard is reported to be looking for a buyer for the balance of his ownership in Virgin Atlantic and I doubt if he would assist VOZ further. Reports also ponder the possibility of Alliance Hldgs. (AQZ) rising but although they have top management, not enough cash and the major shareholder there is QF. My preference would be for Singapore and Etihad to retain their holdings, the Oz markets to secure the remaining approx 60% inc. tricky dickies but retain the brand name but at a much reduced premium $ cost. Key serah serah

    • Jason

      says:

      How about ‘que sera sera’?

      Yes, could possibly go into Liquidation to enable starting afresh, from the ground up.

      But scrap its’ original name. Waste of $15M annually paying Branson for it.

  • AgentGerko

    says:

    Love to know how an independent trust with independent directors approved a $150 million loan to an airline that was clearly losing money at the time. Doesn’t sound too independent to me. As for Indigo partners, my concern is that they buy/operate ultra low cost carriers and I wouldn’t like to see VA turned into a Tigerair 2.

  • Marum

    says:

    @ROD P. I have little knowledge of how to run a large airline. The engineering/deign/maintenance is my Forte.

    I have however noted, that most businessmen are only thinly disguised crooks. (This comes from a lifetime of dealing with them) Most of them will never pay a bill that they can get out of paying. I nowadays make my living as an investor, and this has only reinforced that view.
    Virgin Airline has been a financial black-hole for years. There is no gain in just rescuing it – as you noted. It needs a complete change fro the ground up. NOT JUST A REVAMP. As you also noted regarding change, I will put in engineering terms: —– 0 x infinity = 0. (where infinity = the amount of cash/subsidies poured in)

    We are sure living in “interesting” times.

    Regards….Marum.

    PS. I hope my HTML instructions for italics and bold respectively, work on this site.

  • Andrew M

    says:

    Indigo Partners in full ownership is likely (not necessarily) to mean:
    1. Conversion back to an LCC. Actually closer to the ULCC end of the airline model spectrum;
    2. Conversation of fleet to Airbus. Indigo Partners has a large order of the A320/1 family (600+ aircraft).

    Interesting times.

  • Rod Pickin

    says:

    Hi Marum, great to read your comments! frankly I can’t wait to see the end result of this saga; to me the main point of interest will be, who will have control of the enterprise and does the incumbent/s have the required skills. Frankly I am not in favour of Private Equity groups involved in such an industry which is truly quite sophisticated in its operation and let’s face it, quite political too, the business really needs more than heaps of cash. Much as I admire the acumen of “Twiggy”, I find his apparent fascination with China well, maybe not the required flavour at this time. Westfarmers, WES, yep very successful, profitable, top management but aviation? I would be very interested at this time to hear from a couple of well respected industry folk as to their thoughts and vision if any for VOZ’s rebirth; – Sir Ron Eddington and
    Brett Godfrey. Like everything else in our lives at the moment, it will take ages to recover and in the case of VOZ, it will not be the same, different but not the same

    • John Butler

      says:

      Really Eddington. Raped Ansett to the stage they owned nothing, sold ANZ a pup. BA – sacked 4,500 staff to get the books back into the black and a Knighthood. No, their are far smarter people out there that do show compassion for their workers.

  • Anthony

    says:

    Even though it’s nearly $7bn in debt, what hasn’t helped it, is Branson wanting $millions’ each year, just for the name to be used.
    An excellent case of ‘money for jam’.

    Hovering vultures, picking at its’ carcass, will not ‘resurrect’ it.

    It needs a ‘cruel to be kind’ approach, of liquidating it, & start afresh, with a much more well managed Company operating, if there’s to be any hope of a second Domestic Airline in Australia.

Leave a Comment to Andrew M Cancel

Your email address will not be published. Required fields are marked *

Velocity Frequent Flyer owner pursues Virgin for $150m

written by Adam Thorn | April 28, 2020
A file image of Virgin Australia Boeing 737-800 VH-YIR at Auckland Airport. (G B_NZ/Wikimedia Commons)
A file image of Virgin Australia Boeing 737-800 VH-YIR at Auckland Airport. (G B_NZ/Wikimedia Commons)

The company that operates Velocity Frequent Flyer is to pursue Virgin Australia as a creditor to recoup a $150 million loan extended in 2014.

The Australian Financial Review also reveals Velocity Rewards will be seeking $10 million worth of pre-bought seats set aside for frequent flyer members.

It comes as administrator Deloitte is set to appoint Morgan Stanley to oversee the airline’s sale, and more details have emerged on potential frontrunner Indigo Partners.

Advertisement
Advertisement

Velocity Rewards told the newspaper in a statement that it still hopes to have a strong relationship with the airline moving forward, but that it had a legal duty to seek the money it’s owed.

“Velocity has always had a strong partnership with Virgin Australia, and it’s our hope that this is able to continue well into the future,” a spokesperson said.

“The Velocity Frequent Flyer program has always had a trust to protect the interests of members. The independent trustee, Velocity Rewards Pty Limited, has general fiduciary duties which exist as a matter of law and a governance structure that includes an independent director and policies directing how trust funds can be invested.”

Meanwhile, adviser Houlihan Lokey will work with Morgan Stanley to oversee any sale, and the team will be familiar with the situation as they were approached by the business before administration to find a rescue package.

PROMOTED CONTENT

Finally, American airline investor Indigo Partners, thought to be one of the frontrunners to save Virgin, actually came close to a controlling stake 18 months ago.

The Sydney Morning Herald revealed on Tuesday morning that it agreed to buy a 20 per cent stake from Chinese conglomerate HNA, but pulled out after being unable to buy out fellow shareholders Eithad and Nanshan.

Indigo was said to want full control in order to be able to make changes to the company.

Other shareholders include Singapore and Sir Richard Branson’s Virgin Group.

Yesterday, Australian Aviation reported that Perth Airport had impounded four Virgin Australia aircraft with heavy machinery to help it recover $16 million in outstanding invoices for airfield and terminal charges.

It came as Deloitte administrator Vaughan Strawbridge revealed the airline’s total debt is $6.8 billion – far higher than previously reported.

The airline group confirmed its collapse last week. After the announcement, 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:

8 Comments

  • Rod Pickin

    says:

    My view may well draw scorn from some quarters but, if an Australian organisation cannot be found to secure ownership and operating rights for VOZ then the company should be de-listed from the ASX and the assets “materialised”, then back to the drawing board. Failure to secure such local controls means we would be exposed to the same problems in the future, ie. no change = no change. It is pertinent to note that Sir Richard is reported to be looking for a buyer for the balance of his ownership in Virgin Atlantic and I doubt if he would assist VOZ further. Reports also ponder the possibility of Alliance Hldgs. (AQZ) rising but although they have top management, not enough cash and the major shareholder there is QF. My preference would be for Singapore and Etihad to retain their holdings, the Oz markets to secure the remaining approx 60% inc. tricky dickies but retain the brand name but at a much reduced premium $ cost. Key serah serah

    • Jason

      says:

      How about ‘que sera sera’?

      Yes, could possibly go into Liquidation to enable starting afresh, from the ground up.

      But scrap its’ original name. Waste of $15M annually paying Branson for it.

  • AgentGerko

    says:

    Love to know how an independent trust with independent directors approved a $150 million loan to an airline that was clearly losing money at the time. Doesn’t sound too independent to me. As for Indigo partners, my concern is that they buy/operate ultra low cost carriers and I wouldn’t like to see VA turned into a Tigerair 2.

  • Marum

    says:

    @ROD P. I have little knowledge of how to run a large airline. The engineering/deign/maintenance is my Forte.

    I have however noted, that most businessmen are only thinly disguised crooks. (This comes from a lifetime of dealing with them) Most of them will never pay a bill that they can get out of paying. I nowadays make my living as an investor, and this has only reinforced that view.
    Virgin Airline has been a financial black-hole for years. There is no gain in just rescuing it – as you noted. It needs a complete change fro the ground up. NOT JUST A REVAMP. As you also noted regarding change, I will put in engineering terms: —– 0 x infinity = 0. (where infinity = the amount of cash/subsidies poured in)

    We are sure living in “interesting” times.

    Regards….Marum.

    PS. I hope my HTML instructions for italics and bold respectively, work on this site.

  • Andrew M

    says:

    Indigo Partners in full ownership is likely (not necessarily) to mean:
    1. Conversion back to an LCC. Actually closer to the ULCC end of the airline model spectrum;
    2. Conversation of fleet to Airbus. Indigo Partners has a large order of the A320/1 family (600+ aircraft).

    Interesting times.

  • Rod Pickin

    says:

    Hi Marum, great to read your comments! frankly I can’t wait to see the end result of this saga; to me the main point of interest will be, who will have control of the enterprise and does the incumbent/s have the required skills. Frankly I am not in favour of Private Equity groups involved in such an industry which is truly quite sophisticated in its operation and let’s face it, quite political too, the business really needs more than heaps of cash. Much as I admire the acumen of “Twiggy”, I find his apparent fascination with China well, maybe not the required flavour at this time. Westfarmers, WES, yep very successful, profitable, top management but aviation? I would be very interested at this time to hear from a couple of well respected industry folk as to their thoughts and vision if any for VOZ’s rebirth; – Sir Ron Eddington and
    Brett Godfrey. Like everything else in our lives at the moment, it will take ages to recover and in the case of VOZ, it will not be the same, different but not the same

    • John Butler

      says:

      Really Eddington. Raped Ansett to the stage they owned nothing, sold ANZ a pup. BA – sacked 4,500 staff to get the books back into the black and a Knighthood. No, their are far smarter people out there that do show compassion for their workers.

  • Anthony

    says:

    Even though it’s nearly $7bn in debt, what hasn’t helped it, is Branson wanting $millions’ each year, just for the name to be used.
    An excellent case of ‘money for jam’.

    Hovering vultures, picking at its’ carcass, will not ‘resurrect’ it.

    It needs a ‘cruel to be kind’ approach, of liquidating it, & start afresh, with a much more well managed Company operating, if there’s to be any hope of a second Domestic Airline in Australia.

Leave a Comment to Andrew M Cancel

Your email address will not be published. Required fields are marked *

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