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Part 2: The year that changed Australian aviation

written by Adam Thorn | December 23, 2020
Virgin Australia 737-8FE VH-YIV
A Virgin Australia 737-8FE lands at Melbourne YMML (Victor Pody)

On 31 December 2019, Chinese authorities treated a small number of citizens for a mysterious illness in Wuhan. Fast forward to 23 March 2020, and Australian Prime Minister Scott Morrison announced an outright ban on all international flights leaving the country. This is the story of how coronavirus took our industry by surprise in 2020, as told through snippets of our news stories.

In part 2, we outline the battle for government funding and the collapse into administration of Virgin Australia. Click the following links to read parts three, four and five or part one

23 March

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Prime Minister Scott Morrison now effectively bans anyone from leaving the country, except for a few specific exemptions. More dramatically, he puts the country in a partial lockdown by announcing the outright closure of social venues such as pubs, clubs, restaurants and cinemas. Speaking in parliament, he says, “We summon the spirit of the Anzacs, of our Great Depression generation, of those who built the Snowy, of those who won the great peace of World War II and defended Australia. For many, young and old, 2020 will be the toughest year of our lives.”

23 March

Rex delivers an ultimatum to the government to underwrite its losses, or else the airline will stop most of its services. Rex’s deputy chairman, John Sharp, argues the previous package of help is not enough, saying, “The federal government has acted swiftly by promising a rescue package to the airlines of $715 million. However, the direct benefit to Rex from this package is only $1 million a month, which is grossly insufficient to cover the $10 million a month we expect to lose running the heavily reduced schedule we announced last week.” He adds that “local councils are also a true disappointment”.

25 March

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Virgin Australia cuts domestic capacity by 90 per cent and follows Qantas in standing down 8,000 workers. Around 125 aircraft are grounded and Tigerair suspends all flights immediately. Chief executive Paul Scurrah says, “We are talking to our teams and we are working hard to do what we can to protect jobs and extend payments for as long as possible.”

26 March

Eight regional airlines warn they could go out of business in “days rather than weeks” unless the government moves to underwrite Australia’s small airline operators. In a dramatic open letter, the consortium warns that an announcement of help needs to happen in 24 hours’ time.

The email, sent by Newcastle carrier FlyPelican, stated, “The government, while repeatedly proclaiming the importance of protecting regional aviation as a vital resource for growing the economy, appears, instead, to have wiped its hand of the industry at what is its most critical time.” Carriers signing the letter included Air Link, Aviair, Alliance Airlines, Chartair, Fly Corporate, FlyPelican, Hardy Aviation and Sharp Airlines.

Meanwhile, Flight Centre Travel Group announces that 3,800 sales and support employees will be either stood down or made redundant in Australia, and Virgin follows the previous day’s announcement by revealing that 1,000 of its 8,000 stood down employees permanently redundant, including all 220 Tigerair pilots. One cabin supervisor, Cassy, goes viral after delivering a pitch-perfect farewell speech to her staff and crew as her aircraft was about to land. “Tough times don’t last,” she signed off, “but tough people do.”

27 March

Rex says it may not be able to transport COVID-19 testing samples from regional areas to capital cities for analysis unless it receives a government bailout. Australia’s largest independent airline says it will announce the “shutting down of its network” later that day if it doesn’t receive “concrete proposals” of financial aid.

John Sharp says, “The federal, state and local governments all need to act urgently and decisively to determine specific assistance packages so that the airlines can at least provide the bare minimum of essential air services to keep the communities running. “For example, Rex carries critical blood supplies daily to regional and remote communities on its network, as well as transporting COVID-19 testing samples from regional centres to capital cities for analysis. This may no longer be possible in the foreseeable future.”

With international flights trickling to a halt, Qatar Airways surprisingly announces it will add an extra 48,000 seats on services from Doha to Sydney, Melbourne, Perth and Brisbane from 29 March until mid-April. The airline says it has put on the extra capacity to help bring people home, and includes its first-ever flights to Brisbane. Qatar is able to make the move after the Australian government relaxed a long-standing treaty that limited the number of services it could provide.

Finally, on 27 March, the government announces that passengers landing in Australia will now be transferred from arrivals to a hotel to complete their 14-day isolation period – with the Defence Force checking people comply with the measures. Prime Minister Scott Morrison made the announcement because 85 per cent of cases of coronavirus are directly or indirectly acquired from overseas. Under the previous rules, people went back to their homes and signed a declaration committing to not leaving for two weeks.

28 March

The government announces a $298 million government bailout for the regional airline industry. Rex says the business has the “utmost gratitude” for the financial package, which will allow it to keep a revised schedule operating for six months. Sharp indicates that, without the aid, it would have stood down 90 per cent of its workforce. “All regional communities and residents should be extremely grateful to the Coalition government for its commitment to the future of the regional cities,” Sharp says. “This meaningful assistance package not only seeks to keep essential air services going, but also tries to prevent the existing regional aviation providers from collapsing.”

6 April

The government announces it’s to supplement a selection of repatriation flights to London, Los Angeles, Hong Kong and Auckland, operated by Qantas and Virgin Australia. The news came after three of the major transport hubs facilitating trips, Abu Dhabi, Dubai and Singapore, all suspended transit.

Meanwhile, Virgin Australia ramps up its lobbying for a bailout by placing a full-page advert in Saturday’s Daily Telegraph warning of the dangers of a Qantas monopoly. In an apparent swipe at its biggest rival, the text states, “Our biggest competitors need a challenger to keep them honest and innovative. A monopoly won’t even work for them.” The Virgin Australia Group is seeking a $1.4 billion loan from the government to help it survive during the coronavirus crisis.

Finally, Flight Centre Travel Group announces it will close 428 Australian stores by the end of July, or roughly 40 per cent of its network. However, the business has secured $900 million in fresh equity and debt to help it survive the coronavirus crisis.

9 April

Virgin Australia suspends all domestic services from 10 April, except one return flight between Sydney and Melbourne. Previously, the airline had reduced domestic capacity by 90 per cent, flying to just 19 destinations, and cancelled all international journeys. The business says in a statement, “As a result of government restrictions, less people are travelling and we have made changes to our schedules to reflect this. We continue to operate a daily service between Melbourne and Sydney, provide cargo transport locally and overseas, and operate charter flights including assisting the government in bringing Australians home.”

14 April

The Deputy Prime Minister says he’s spoken to both Qantas and Virgin over the Easter weekend about the possibility of the government subsidising a number of domestic flights to maintain air links between capital cities. Michael McCormack tells the ABC that while he will not put a figure on how much money could be made available, he “wouldn’t rule anything out”. In the last few days, reports emerge of Australians arriving back in the country, completing their 14-day hotel isolation, but then struggling to find flights across states to return home. Speaking on television on Monday morning, McCormack says, “We need of course to transfer people around from capital city to capital city. We’ll be looking at what we can do in conjunction with the airlines, who are co-operative.”

20 April

Sydney Airport’s international passenger traffic decreased 96 per cent in March and domestic 97 per cent, as coronavirus restrictions took effect, the business announces. Total traffic for the month of March, though, was 2 million passengers, down 45 per cent on the corresponding period last year. International traffic was just 700,000 and domestic 1.3 million.

21 April

Virgin Australia confirms that it has entered voluntary administration. Administrator Deloitte then confirms a number of investors are interested in saving the airline, saying there is “an extraordinary number of parties keen to be involved”. The business was struggling to service a $4.8 billion debt pile with little revenue coming in, and its attempts to secure a $1.4 billion loan from first, the government, then states, failed.

22 April

Qatar Airways reveals that it carried more than 36,000 passengers to and from Australia in the first two weeks of April, as it capitalises on being one of the last airlines flying regular international routes. Worldwide, the business says it has taken more than 1 million passengers home since mid-February. Both Qantas and Virgin cancelled all international trips at the end of March, though they are undertaking a handful of chartered and government underwritten routes.

23 April

Tigerair reassures staff that they won’t be made redundant despite parent company Virgin Australia slipping into administration on Tuesday. In March, the business made all pilots at Tigerair redundant, leading to questions about its long-term future. The Flight Attendants Association of Australia says employees were “apprehensive rather than relieved. A lot of current Virgin and Tiger employees are ex-Ansett, so there’s a lot of trepidation”.

27 April

Perth Airport impounds four Virgin Australia aircraft with heavy machinery as it seeks to recover $16 million in outstanding invoices for airfield and terminal charges. It came as Deloitte administrator Vaughan Strawbridge reveals the airline’s total debt is $6.8 billion – far higher than previously reported. Creditors include 50 aircraft lessors, across 69 planes, owed $1.88 billion; 26 lenders with secured loans of $2.28 billion; and unsecured bond holders owed $1.98 billion. Strawbridge tells the Federal Court that working through those contracts constitutes a “very significant task” given the “ongoing uncertainty” around the nature of the leases and obligations.

5 May

Catering and ground handling business dnata reveals it’s been excluded from the JobKeeper support package – which provides struggling Australian businesses with $1,500 per employee, per fortnight – because it’s owned by a foreign government. Dnata is owned by the Emirates Group, which is in turn run by the state government of Dubai. The decision puts 4,500 jobs at risk, the business says. “We are surprised and disappointed by the government’s decision to retrospectively amend the JobKeeper legislation,” says spokesperson. “This change, at short notice and backdated to 30 March, excludes dnata, an employer of 6,000 Australians from the JobKeeper scheme.

6 May

Mildura airport follows dnata in revealing it, too, has been excluded from JobKeeper, this time because it’s deemed to be council owned. Talking to the ABC, Mildura’s Peter O’Donnell says, “Nearly every bit of support we’re looking at is unavailable to us despite the fact we’re running 95 per cent down on revenue and we’ve laid off 60 per cent of our staff.”

8 May

Prime Minister Scott Morrison says interstate flights will return in July, and possibly earlier, under a three-stage plan to lift coronavirus restrictions in Australia. The roadmap, agreed in principle by the national cabinet of state leaders, also hinted at the introduction of cross-Tasman, Pacific island and international student travel in mid-winter, too. Currently, a combination of state border closures and day-to-day movement restrictions have ruled out all but essential interstate journeys. The Prime Minister says, “Today, we move ahead with reopening our economy and our society, with a clear plan, and a clear framework, that shows Australians the road ahead.

Meanwhile, Air New Zealand says it will aim to return flights to the majority of domestic airports when the country’s coronavirus restrictions are lowered to ‘Alert Level 2’ – a decision expected next week. Chief executive Greg Foran says the airline plans to operate around 20 per cent of its usual capacity, but will not be able to offer cheap fares because of social distancing requirements. He also warns that, even when all restrictions are eventually lifted, it will be a “slow journey” back to pre-coronavirus frequencies. “This is the harsh reality of closed international borders and a depressed domestic economy, with more Kiwis in unemployment and people watching what they spend,” Foran says.

12 May

Rex says it will aim to rival Qantas, Jetstar and Virgin Australia by expanding its network to service capital cities by early next year. Deputy chairman John Sharp informs the media of the regional airline’s intention to capitalise on recent market upheaval and boost its fleet to include 10 narrow-bodied jets. Sharp suggests that Australia “may as well” have a three-airline market, noting that the new and improved Rex is likely to sit “halfway between a full-service airline and a low-cost airline”. “The domestic aviation market is not going to go back to what it was three months ago so we are ready to scale up in line with demand,” he says. “We are doing this because we see an opportunity. We have the advantage of having successfully run an airline for 18 years.”

13 May

The next AVALON airshow is being postponed from 23 February 2021 to a later date, likely to be in November. The ADMA foundation, which organises the biennial event, blames the lengthy logistical lead times and uncertainty about international travel caused by the coronavirus pandemic. The move follows the postponement of its sister shows Land Forces and PACIFIC International Maritime Exposition.

14 May

Air New Zealand declares on Wednesday it is ‘warming up’ its engines as it prepares to resume recreational flights today. The airline’s Twitter account says, “See you soon New Zealand” as the business issued guidance for passengers flying under lowered ‘Alert Level 2’ restrictions, which are now in effect. Jacinda Ardern announced earlier that Kiwis could travel around the country and meet friends and family for the first time in weeks.

15 May

Virgin Australia’s administrator says it expects to receive eight indicative offers ahead of its 6pm deadline. Deloitte adds nearly 20 interested parties had been granted access to the data room and eight to a “Virgin 2.0 business plan”. Lead administrator Vaughan Strawbridge points out there was “plenty of competitive tension” during what he termed an “aggressive process”. “It’s one we are confident we can achieve,” says Strawbridge. “Our objective remains to deliver a revitalised, viable, and profitable airline under new ownership.”

Click here to read part three

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