Virgin collapse latest: More than 10 buyers keen

written by Adam Thorn | April 21, 2020

Virgin Australia Group’s chief executive Paul Scurrah has revealed more than 10 parties have expressed interest in recapitalising the company after it entered voluntary administration on Tuesday morning.

In a hastily arranged press conference with new Deloitte administrator Vaughan Strawbridge, the business confirmed it had no plans to make any immediate job cuts, staff would continue to be paid or receive JobKeeper payments, and that they hoped to wrap up a deal to save the airline in the next “two to three months”.

The airline group earlier confirmed its collapse on Tuesday morning, after the announcement leaked the previous evening. The business was struggling to service a $4.8 billion debt pile with little revenue coming in.

Advertisement
Advertisement

For more of our in-depth coverage, click the links below:

The press conference brought good news for staff, customers and shareholders after Scurrah revealed “in excess” of 10 parties were interested in investing.

“Obviously, we have to keep those parties confidential, but they are in excess of 10 parties, who are known to us who have got a keen interest in being part of the restructure of Virgin,” Scurrah said.

BOEING 737 800 VIRGIN AUSTRALIA MEL OCT17 RF 5K5A3203 2
A Virgin Australia 737 800 flies past a rainbow in Melbourne (Rob Finlayson)

Strawbridge also cited his determination to wrap up the process as quickly as possible, describing potential suitors as “very sophisticated parties”.

PROMOTED CONTENT

“We plan to run that process very hard with our advisers, in order to make sure that that process is as short a period of time as possible,” he said.

“We are calling for expressions of interest, which we expect we will receive within the next couple of weeks.

“There will be a flier going out today, an information memorandum going out next week, and then we’ll define the process and the timetable at that point. But we expect to be in the position to know what the outcome will be, or likely to be, over the next two to three months.”

Scurrah said the company would come out of administration “leaner, stronger and fitter”.

“We take comfort from the comments from the government that this country needs a robust and healthy two-airline market. And because of this procession we’re going through, because of the early decision of our board, that airline will be Virgin Australia,” he said.

Scurrah added that he was also in constant contact with Virgin Group founder Sir Richard Branson, and said he “cares deeply” about the airline.

“I talk to Richard on a regular basis. It must be remembered that Richard takes a lot of pride in this company and it’s one of the airlines he pays a lot of attention to,” he said.

“Richard’s portfolio has hotels, cruise lines and airlines, so you can understand that Richard is hurting. But he’s doing everything he possibly can to help us get through this and maintains a strong interest in participating going forward.”

The high profile businessman released an Instagram video for staff shortly after the announcement of administration was made.

Did you know that Australian Aviation Magazine comes digitally? Subscribe to Australian Aviation’s digital magazine for just $59.95 a year! Our app is available on mobile, tablet and PC devices! Subscribe now at australianaviation.com.au.

40 Comments

  • Peter

    says:

    Lot’s of talk about new owners, re capitalising and such but nothing about all the suppliers, some of them small businesses, that are owed money who may not see that money and will go to the wall without fat cat investor coming in to clean up and make a fortune once what is owed the creditors are wiped out!

    • Luke

      says:

      maybe small businesses shouldn’t have extended so much credit ? No one forced them to, in this day of credit cards, many small businesses no longer have accounts to chase.

  • Rocket

    says:

    I’m sorry but Branson ‘hitting out at the Australian Government’.
    This bloody airline has been comprehensively run into the ground. It is half the size of Qantas, has had billions poured in for the last 10 years, has ZERO to show for it except loss after loss after loss and more debt than Qantas.
    To even suggest the government is somehow responsible if it goes under is narcissism and idiocy beyond belief.

    • Luke

      says:

      sounds like when qantas was going under 7 years ago

      • Rocket

        says:

        Except that Qantas hadn’t been run into the ground, it undertook a 2.2bn write down of the book value of the 747 fleet due to the collapse in the value of 4 engine aircraft worldwide. It made a $600M loss that year because of the capacity war. It was obvious to anyone who knows anything about business that the CEO was trying to leverage a relaxation in the ownership caps within the 49% to allow easier raising of capital.
        Completely different situation to Virgin who have spent billions they don’t have and have not made a profit for nearly 10 years.

        • Scott

          says:

          Quite frankly Rocket, we are all sick and tired of hearing the Qantas loss is justified and reasonable at -$2.5b and lead to no company tax being paid for about 8 years, and that displayed fantastic leadership and management. In the next breath the Virgin losses are “bad management”, I’d like to offer the suggestion that the infrastructure required as a FSC, Virgin has invested 6b over the last 8 years, something legacy airlines spread over decades or even had the government pay for it pre float.

          • Rocket

            says:

            Quite frankly, you would do well to examine history. Everything Qantas achieved from 1947 to 1995 was done through retained profits. It went from a small operator to being worth $2B+ only ever receiving about $147M in capital rom the Federal Government.
            Virgin has wasted money hand over fist. It has good product, it didn’t need to spend millions on Club’s and the like, so completely over the top and treated like some classified secret, probably to take attention away from the hundreds of millions sunk into it and it did it all with money borrowed from other airlines that own it… it then proceeded to not make one single profit in nearly a decade… it sold 35% of Velocity for $350M then bought it back two years later for $700M, after also having borrowed money from Velocity. It bought a regional airline and parked half its fleet, then proceeded to pay a competitor through the nose to operate the flights for it.
            That’s called not bad management, but pathetic management, verging on no management at all.
            Quite frankly I’m sick of hearing how this three ring circus has all the excuses in the world. Ansett also had decades to build brand and infrastructure and they were also poorly managed and went broke.
            Stop making excuses for people who took millions in salary and wrecked the company.

  • Steve

    says:

    This hopefully will be great news . I’m a FF with Virgin & am looking forward to flying with them again once everything is hopefully sorted.

    • Luke

      says:

      maybe keep virgin out of name of new entity. Spirit of Australia sounds great ?

  • ham

    says:

    how about Branson chipping in with a few dollars

    • Paul

      says:

      Branson is appeal8ng to the British government for £500m to keep Virgin Atlantic afloat.

      • Shane

        says:

        Maybe he should sell his island

      • Scott

        says:

        If you held your horses for a day or so, Branson is now putting up $200-$250m, there you go.

        • CB

          says:

          Virgin always looked like a slick outfit to me. Good service on flights and happy staff always compared to the alternative. Loads appeared to be very high for many years before COVID. You don’t stay in the competitive airline business for 19 years if you don’t know what your doing. It seems though, that every time there is a crisis, first 911, now COVID, Australia’s second airline goes under or restructures. Investors (other airlines) know these thing happen. But anyway, they buy in (Etihad, HNA etc.) presumably to secure a connecting domestic network in Australia because Qantas aren’t interested in doing business with them for strategic reasons or otherwise. At some stage, for years on end, when the loads are great, staff are still happy, Virgin can’t do any wrong, they are making money, creditors are happy. My question is where does the money go? I am having hard time believing expensive leases on a few A330s sent the company spiralling with billions of debt, from which they could not recover. So does the money go back to the home countries of the investors? If yes, why? If not, are the investors just doing this to solely secure Australian domestic connections? My point is why be in this business if whenever there is a crisis you are back out of business? Generally, people go into business to make money. I do not work for an airline. I hope that the new ownership of Virgin can ensure the company can genuinely absorb economic shocks, so that this cycle will not be repeated. This COVID crisis has demonstrated once again that Australia, medically speaking, can cope exceptionally well with crisis and can come out well on the other side. I am very confident, if we put our minds to it, that with the right team, Australia’s second airline can prosper and survive anything thrown at it.

  • Lhano Martins Xavier Junior

    says:

    I am happy with 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 less than 1 billion (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.

  • Jeff Carswell

    says:

    Good to hear that the tax payer is not going to cover the debt Virgin has accumulated. Why should the Australian tax payer be expected to compensate an airline that has been ooorly managed for a long time!

  • Tim Nunn

    says:

    Terms like ‘Collapse’ are inaccurate and only add to confusion. If Virgin had infact collapsed, it would be in liquidation, not administration.
    Not helpful.

  • Luke

    says:

    obviously Virgin had way too many staff, all getting paid way too much.

    New entity will probably have less staff, being paid less, with less perks, but can easily make a go of it, if concentrates on BNE, SYD,MEL, CBR, PER

  • Paul

    says:

    Funny how TWU wants the govt to chip in, but Industry Super funds have said Virgin is a high risk investment.

  • Paul Robson

    says:

    Whilst I agree the government should not have loaned Virgin any money, rest assured this Government will indeed be pleased to see a leaner, meaner Virgin operation emerge, and some of that leaner side of things, will come from lower wages for the new employees!
    Meanwhile Godfrey,Branson and mates early on,then Borghetti walked away with millions!

    • Luke

      says:

      but it’s obvious there were too many staff being paid too much. A few million to senior staff makes no difference.

      • Rocket

        says:

        @ Luke Too many executives being paid millions and too many ‘specialists’ for every damn thing… mostly specialising in not adding any value to the company at all.
        Administration will hopefully bring about a long overdue clean out.

  • Salesh

    says:

    I wonder what JB has to do with all this…sorry he is laughing all the way to the bank…
    Not bad for a former baggage handler

  • Aaron

    says:

    I’m tired of the old “poorly managed” rhetoric. Yes, under previous management the business was underperforming. However, for the last twelve months, the leadership and new direction has been inspiring. It’s a shame that, due to the effects of this pandemic, VA never got to see the benefits of the right sizing program. A program through which significant sacrifices were made by the staff and incredibly tough, but necessary, decisions were made by management.
    The upside. The right sizing programme has positioned the business such that the creditors will hopefully see great potential. VA has a working culture that compares to no other company. The VA team has a strength and dedication within its talented workforce that assures success under the right leadership. And VA has the right leadership.
    I’m confident that Deloitte will see the potential of the business and the passion in its people. I’m confident that it will be able to pave a way forward for a bigger and better VA going forward, benefiting its people, the tourism industry and the community.

    Thank you,

    A prouder than ever Virgin Australia team member

    • Shane

      says:

      Maybe you need to look at your work practices. Been told by a few workers in Sydney that it’s a pretty easy job on the ramp there.

  • Bernard

    says:

    Not impressed how big 5 shareholders have run the airline down and as result not paid tax in 7 years according to a report I heard: if true I’m most upset. I prefer airline to be nationalised for a period as there is important infrastructure in place and then partially sold off with govt controlling it-I’m over these ipo’s that were basically designed to pull the unsophisticated/poor knowledge investor in-take note please govt. I suspect there is too many contingent or hidden liabilities the govt is concerned about so sadly that might have been another reason for stopping equity debt swap?
    Not listening to Sir Richard, the smallest of 5 investors and I suspect a mouthpiece for the Asian ones who stand to lose more. Anything HNA touches turns to shit. I hear Etihad needs cash so anything they can scrape out of it is a bonus before they run off ( if they could).
    Doubt there are white knights out there? Feels more like vultures waiting-prove me wrong please.

  • Bernard

    says:

    Ps- I’m prepared to run the airline for a fraction all these high paid execs did with the condition its not to be run as a tax dodge.

  • Peter

    says:

    It is obvious Paul Scurrah does not know the role of the administrator. The administrator is now running the show, not Scurrah. The recent owners have lost everything. The new owners may not even employ Scurrah.

  • Mark

    says:

    Wasn’t that the same number of investors interested in Ansett ?

  • Scott

    says:

    Collapse is a totally inaccurate headline, they are in administration for re structuring, and all indications are they will emerge and stronger financially.
    If a company goes into LIQUIDATION then it collapses, no need for sensational headlines.

    • Adam Thorn

      says:

      Hi Scott,

      Thanks for your comment. I think it’s a subjective thing. For instance, I’ve just done a Google search and ‘collapse’ was also used by the Sydney Morning Herald, Australian Financial Review and ABC, among others.

      Adam

  • john

    says:

    it’s really quite simple – costs have been more than revenue.

    Virgin should have stuck to their knitting.

    Very expensive A330 leases didn’t help, but costs have to be reduced dramatically.

    Overly generous EBAs, will go.

    Get ready to work for less (like everyone else) except public servants.

  • Neil A Morrison

    says:

    Why should I subsidise a business that is in debt. What have the Board & Senior Exec been doing watching this unfold. Lots of talk in last years annual report but still sliding backwards.
    Taxpayers should NOT pay a cent.

  • Scott

    says:

    Just because it’s incorrectly used by others doesn’t make it correct.

  • Meepa

    says:

    VA is a BADLY managed airline. Yes I know, because I worked in Tigerair. VA did nothing but interfere with Tiger, slow down our growth to protect its own routes and then have the hide to sack ALL the Tigerair and VANZ pilots and staff, only for VA to do the flying instead! The only way they can get away with this illegal move is to blame covid as the smokescreen (and it is a massive effect) but this was in the pipeline already sadly.
    I have NO sympathy for Scurrah or for VA. I don not wish to see front line staff suffer, but its better that VA go the way of the extinct and emerge as a renamed airline and new owners otherwise 2500+ staff have been sacked for a crappy plan.

  • Craig

    says:

    Hi I would use Tiger Air as new airline with BUSINESS Class and scrap Virgin AUSTRALIA saving money paid to Brandon and then just have to paint the planes over time

  • Carina

    says:

    Let Air NZ in… the government in NZ bought them out many years ago.
    Shares were 7 cents.
    Last time I looked they were$2 :50
    Success.
    And we cannot under estimate the CEO of Qantas
    A real gem..
    Hopefully things will improve…
    Compass and Tiger were the best things that happened to flight in Australia.
    Really they did not want them to succeed.
    But if it was not for them
    Air travel would not be as favourable as it has been .
    Well done.

  • Paul Robson

    says:

    I am sure Luke those 10000 Virgin employees who have just lost their jobs, wouldn’t mind a spare million!
    I would suggest to you there were too many execs overpaid, not so much too many workers overpaid!
    The greed of these managers knows no bounds, when I started flying my CEO earnt 200,000 more than me…….now it’s a difference of millions, and the gap keeps getting bigger!
    No doubt a new Version of Virgin will emerge, frontline staff on less money….no reduction for management, and if Mentha Korda and Ansett is any example, Deloitte will rake in millions!

  • Linda Weaving

    says:

    Poor little Richard! How he must be ‘hurting’ whilst luxuriating in his Cayman Island tax haven, counting his $billions but refusing to share them with the companies or employees about whom he purports to care. ?
    Give me a break!

  • John Day

    says:

    When will they learn, a dedicated and competent CEO is in the mind and not the pocket. My best work was done when I was employed out of compassion, at 50%, and working 10 – 12 hours a day. It was a challenge. John.

Leave a Comment

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

Each day, our subscribers are more informed with the right information.

SIGN UP to the Australian Aviation magazine for high-quality news and features for just $99.95 per year