Virgin recorded huge $3.1bn loss in last financial year

The airline entered administration in April 2020 owning more than $7 billion and was subsequently bought by new owner Bain for $3.5 billion.

Documents published with the Australian Securities and Investment Commission on Tuesday revealed the business had just $740 million of cash to service over $5 billion of debt that was due within the next year.

The $3.1 billion loss was the ninth negative return in a row. The airline also has $1.2 billion of debt currently that it carried into administration, though this is mostly in bank loans for aircraft.

Last year, Australian Aviation revealed how Virgin Australia’s administrator Deloitte criticised the company’s “misconceived business strategy” to shift away from being a low-cost carrier as one of the main reasons for the business’ troubles.

“This ultimately resulted in Virgin increasing its capacity on certain routes. Qantas responded by taking action to protect its routes, market share, customer base and ultimately, its business model,” Deloitte said. “Qantas was able to significantly reduce its cost base but Virgin did not have the size and financial strength to sustain this capacity increase without suffering significant losses.”

Bain beat out Cyrus Capital Partners in May 2020 to become the administrator’s preferred bidder for the airline, but the takeover wasn’t rubber-stamped by shareholders until September.

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The takeover included cutting axing 3,000 roles, scraping the Tigerair brand and initially downsizing the business’ 737 fleet from 85 to 56 as well as removing all other aircraft models.

Bain’s deal to purchase the airline also meant unsecured creditors, including bondholders received between just nine and 13 cents in the dollar on their investment.

In July, Australian Aviation revealed the total breakdown of money owed was:

• Secured lenders and aircraft financiers are owed $2,284 million;
• Unsecured bondholders are owed $1,988 million;
• Trade creditors are owed $167 million;
• Aircraft lessors are owed $1,884 million;
• Landlords are owed $71 million;
• Employees are owed $451 million (in the event of liquidation); and
• Customers entitled to credits for flights that were cancelled due to the pandemic are potentially owed $604 million.

The situation for the airline has been far more positive for the airline recently, after it announced in April it would hire 150 new cabin crew and return 220 from its axed long-haul operation.

The airline also confirmed the return of 10 leased 737s, a plan to return to 80 per cent pre-COVID capacity by June and new routes between Melbourne-Hamilton Island and Melbourne-Darwin.

“Virgin Australia Group is committed to maintaining a market share consistent with its pre-COVID position,” the business said in a statement.