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.