Virgin Australia is set to enter voluntary administration after a crunch meeting of its board of directors on Monday, according to reports.
Both The Sydney Morning Herald and The Australian Financial Review have reported that a decision is “imminent”, with the latter citing sources claiming 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.
The two newspapers earlier reported rumours that private equity firms were considering purchasing the airline’s assets if it goes into administration.
The Australian Financial Review speculated that BGH Capital, a private equity operator run by Ben Gray, was doing the numbers on the business.
Then, the SMH followed by reporting that, in fact, a number of private equity operators and hedge funds were interested.
One big private equity operator, it reported, said he knew of 20 funds looking for a deal but would only make a move if administration happened, and debts were therefore wiped out: “Nobody will put money in and be behind the existing debt.”
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.
The news comes after an attempt to secure finance from a number of different states hit a roadblock when a row broke out over where the company should base its headquarters.
The argument began on Saturday, when the Palaszczuk government offered Virgin a $200 million lifeline on the condition that other states also contribute and the business maintains its base in Brisbane.
However, the next day, NSW Treasurer Dominic Perrottet hinted that any contribution from its government would require the airline to move to Sydney, instead.
“Virgin should have their headquarters for both Virgin and Tiger in Sydney,” Perrottet told Sky on Sunday night.
“I’m always open for businesses right across the country to relocate to New South Wales and create jobs here in our state, particularly when you look at the aerotroplis in western Sydney.
“It provides a significant opportunity for Virgin and other airlines to relocate.”
Finally, on Monday morning, Queensland angrily hit back, with Minister for State Development Cameron Dick insisting the move would force 1,200 staff to move states to remain in a job.
“It’s a nonsense to think the Prime Minister would even consider a NSW plan to move the airline there,” he said.
Rod Pickin
says:If VOZ is placed into administration, which is probably the best scenario, there is only one meaningful, long term viable move that can be made. The Fed. Govt. takes over the enterprise and overseas it’s management and operation until such time that it can be released for sale into the market, the Oz market. Private equity groups may well have the capital but their long term interests are not with those of the enterprise in question and the P.M. knows this too.
James B
says:Where is John Borghetti? He has some explaining to do.
Russell M
says:Let’s also hope there is a pretty good sweep out of the Board.
JB was a big part of the problem in recent years, but some of the Board must go too.
Hopefully, from the ashes, something quite new will arise – similar to Virgin Blue…. fleet of ONE or TWO, not eleven (Ansett style), a business class which is simply bigger seats and $30 worth of nibbles and drinks off the cart. Forget the lounge, it had become as daggy and poor as the apology for a lounge that the other airline has.
Forget flying jets into Bundaberg and places like that (was a Bandierante route and a Nomad on Saturdays back in the day and that’s all it needed). Forget trying to double up on every regional port.
737-800 for main routes and a decent small jet for thin routes.
Back to a simple business model, lean and mean, and no more JB style grandure.
Please?
Jack Chomley
says:The vultures are circling, debts wiped with huge losses to many ordinary businesses/people and then the Vultures assemble the ‘pieces ’ And continue on?
Grubbiness in the corporate world……
Karen Tsolakis
says:Qantas with Jetstar is more than able to service
Most of Australia & they will do it brilliantly.
Rex & Alliance are also very capable & can expand if possible.
Too bad for Virgin, they had some good people.
Andrew
says:I don’t think the Taxpayers should be bailing out an airline that is owned by foreign governments who are unwilling themselves to bail out the airline.
Ian
says:Good news. Now a smaller more nimble airline can take on qantas & keep them honest. Might not be calked virgin & less staff on much less pay.
Freddie
says:If this happens then those responsible for not backing Virgin should bear the brunt of the public anger at the unrealistically costly airfares that will be introduced by the ‘one airline’ policy. This airline still owes a huge amount of money to the Airport authorities – landing fees etc. If the Airport authorities demand their money before any aircraft leave the ground – where does that leave the Australian public. …..?
rob
says:Just as well the federal government refused to loan them money, we could have lost the lot.
Rais
says:This is what should happen. The shareholders have made it clear that they don’t think the existing indebted company is worth saving. So dump the company and let new owners buy the assets, including trademarks.
Edward
says:So Austrlia’s politicians have been collectively congratulated in recent days for leaving politics at the doorstep, and now a bunch of political wrangling could see an essential element of a stable Australian aviation industry turn to dust. Obviously there are short memories of the pain that the Ansett collapse caused, and the time around there is no minor player like ‘Virgin Blue’ to rapidly fill the void. When society normalises ()and it will happen) the country could well be left with no Virgin and no Rex. That would have to be an ‘own goal’ when nationally and internationally the country will be trying to generate hard currency (via tourism) and get vast sections of society gainfully back to work..
Marum
says:Honestly, I am not in favour of any taxpayer funded organisation that is almost wholly overseas owned.
Also honestly. I am appalled that these ambidextrous wankers whom we elect, still cannot to forbear to play these infantile political games. Especially during a crisis such as this.
A pox upon all their houses….Marum.
David Karr
says:Virgin needs to bailed by either the Australian Govt or the $3t in funds from the superannuation sector, in order to be viable.
If govt bailout then Virgin needs to be in govt hands for the duration.
Foreign ownership did NOTHING for the airline and Australia.
We need a TWO AIRLINE policy so that the big boy stays honest and pays the CEO much much less.