Virgin Australia ‘in administration’

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In what would be the biggest coronavirus-related airline failure so far, reports from Sydney say that Virgin Australia has been placed into administration with an announcement due on Tuesday morning.

The airline had been in bail-out talks with both regional and federal Government, with reports that the federal request was for A$1.4 billion (£700 million).

This is NOT necessarily the end of the line.

Virgin Australia 'in administration'

Virgin Australia had exceptionally high debt of A$4.8 billion (£2.4 billion).  The airline is very well regarded in Australia and, freed of its debt burden, should have a future.

There is substantial concern in Australia over what would happen to domestic air fares if Qantas had a virtual monopoly.  The Guardian reports that the head of the Australian Competition and Consumer Commission, Rod Sims, has insisted that Australia needs two airlines, and has launched an investigation into attacks on Virgin Australia by Qantas.

Virgin Australia 'in administration'

The key issue now is whether the Government or a private investor chooses to buy the airline out of administration, or whether the lenders agree to a ‘debt for equity’ swap which would give them the keys.

It isn’t clear what would happen to people waiting for refunds on cancelled tickets, but I would suspect that a credit card chargeback will be required.  I would also suspect that future bookings will not be honoured.

None of these routes would mean that the ‘Virgin’ branding would necessarily disappear.  The administration process should allow the existing contract to be voided but it presumably adds value to the business.  Virgin Group only held a 10% stake in the airline and there is no requirement for Virgin-branded businesses to include Virgin Group as a shareholder.

Deloitte is believed to be lined up to act as adminstrator, with the Virgin Australia CEO Paul Scurrah remaining in place.

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Comments

  1. Norwegian now closer to the door as they declare bankruptcy on three subsidiaries used for hiring crews. Clever way to offload them really.
    Can’t post a link as Rob’s rules will block it, but Flight Global has the story for anyone who wants to google it.

    • The easiest way to publish a link is if you remove the www, so it doesn’t show a link. So for example, headforpoints.com instead of www . headforpoints.com. Everyone can publish it easily, and everyone know it’s a website.

  2. I am surprised by the quality of some comments, Virgin haters at their finest.

    Comments such as ‘let them go bankrupt’ undermine the impact to the monopoly in the Australia airline market, impacts to the existing employees and social problems that we can’t yet anticipate with the fall of such a big business, not to mention the impact to the existing Velocity members as no one can value their loss of their miles.

    Addressing all accuses to an individual (who doesn’t even earn dividends at all) or even celebrating an aviation industry disaster reveals one’s ignorance and lack of awareness of how things work in the world of business.

    Also for those who commented ‘let them go bankrupt’ – FYI they do not go bankrupt. They go under administration. I can’t shocked they can call an administration a bankrupt, it is pathetic to watch these people keep embarrassing themselves and others with their ignorances just because of the hate over a person. It is the illiteracy in the language of business.

    • It’s somewhat telling that many supporters of bailouts seem as quick to worry about the miles lost (or the risk of Avios devaluation) alongside the job losses.
      Regardless of how many points are lost, it’s trivial to losing your job.

  3. Christian says:

    I was working in Oz when Ansett went bust after 9/11. Rod Sims is right – we’ve been here before. Qantas immediately went on an unparalleled price gouging spree. Virgin was only a year old and couldn’t compete while Qantas acted like a rampaging army. You couldn’t get a reasonable fare for love nor money. Australia definitely needs two airlines. The problems come on city pairs beyond the East coast. Sydney, Melbourne, Brisbane are the bankers. Small regionals in the middle of nowhere can lose you a lot of money fast.

  4. Barbara Wakely says:

    I have a lot of Virgin Miles. Should I be converting them to another loyalty program or spending them on something? If so, I’d appreciate suggestions. Thank you Barbara

    • No lockdown for moi says:

      a lot of us converted out 50% or 100% to Hilton Honors a couple weeks ago

      downside is, you are guaranteeing a low conversion rate, 0.5p/ mile

      upside: a bit of safety

      50% of something vs 100% of nothing?

      and are HH points any use to you? or could they be?

      process takes a while, do it by SMS, details on Virgin Atlantic members’ site

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