iscover
The federal government has reportedly rejected a request from the Queensland government to provide Virgin Australia with short-term funding.
The Australian Financial Review reported on 20 May that the Palaszczuk government first approached Canberra on Monday, looking to strike a deal to inject much-needed cash into proceedings. If successful, the deal would have provided administrators with liquidity to tide the airline through to a sale.
However, the outlet now reports that intense negotiations failed to win approval from the federal government, which rejected the pitch early Wednesday.
The attempted deal builds on the state’s interest in taking on a stake in the airline, which it dubbed “Project Maroon”. In recent weeks, newly-minted state Treasurer Cameron Dick floated the idea of committing roughly $200 million to Virgin Australia, contingent on similar financial support from federal and state governments, as well as a host of operational conditions.
The news comes amid growing concerns over Virgin Australia’s ability to remain solvent through to the second credit holders meeting in August, which reportedly led Canadian investment giant Brookfield Asset Management to pull out of the bidding process.
Deloitte confirmed late last week that Virgin Australia has around $100 million left in the bank. Vaughan Strawbridge, who heads up the team of administrators, assured potential bidders that this was enough money to get through the sale.
“We’ve been considering what the options are for potential additional funding should it be required and when would be the appropriate time,” he said.
“At this time, we’ve got enough to get through to our sale process, but we continue to revise that given what we can do around unlocking restricted cash in the group and also around managing the expenses.”
According to The AFR, Virgin Australia is currently burning through cash at a rate of $15 million per week. Three of the four short-listed bidders are reportedly eyeing a downsize in the company’s fleet, which could see the airline cut many of its larger Airbus planes in favour of Boeing aircraft.
Rod Pickin
says:However much gloss you apply, unfortunately the situation for VOZ as we know it is fading and it is not helped by the closure, indefinitely it would appear, of the Qld. borders. Unless we have a late run by “tricky dicky” my guess is liquidation or LCC which serves into the hands of Alliance, (29% QF) and the new found love by QF of the B717 ex Cobham. What a mess.
Craigy
says:QF new found love for the B717? The same aircraft QF have been buying as they come off lease?
Jack
says:Hello Rod!
The ‘writing was on the wall’ for VOZ since NZ/TE got out. They obviously could see what was happening, & didn’t want to be saddled with enormous debt.
Doubt we’ll hear from RB, as he’s no funds, & refuses repeatedly to invest any of his ‘personal’ money.
I’ve been saying for many months’ that they’ll go into Liquidation.
I know of which I speak, having spent my whole career in Intnl Airlines, including QANTAS.
But, time’ll tell, as usual.
Paul
says:Some thinking does not add up. Qld govt want to invest in this organisation. One key aspect of an airline is to travel around Australia to deliver pax to their destination. But Qld premier will not open the borders? Irony or ignoring what an airline does?
Oliver
says:I always thought myself as an Australian.
Dave
says:If ‘Project Moron’ had any chance of getting up, you would think that opening Queensland’s borders as early as possible would be a productive step to this plan? Handing Virgin $200m and then clipping its wings is like handing a family a trolley full of rotting fruit – sure it’s food, but you can’t eat it!
Roll on October State elections – can’t see too many struggling Qld families putting up with this dribble for too much longer.
Matty
says:Surely if you were to take over an airline, the last thing you would spend limited money on would be relocating maintenance and HQ facilities from one state to another. It’s unnecessary cost. Long term that might change but in the short term I cant see it happening.