After much speculation, Virgin Australia has entered into voluntary administration, becoming one of Australia’s biggest coronavirus casualties.
The airline has now appointed accounting firm Deloitte to help restructure and recapitalise the business after the COVID-19 pandemic has left the company facing up to $5 billion in debt.
“Virgin Australia has entered voluntary administration to recapitalise the business and help ensure it emerges in a stronger financial position on the other side of the COVID-19 crisis,” the airline said in a statement to the Australian Stock Exchange (ASX).
This comes after the Australian Federal Government refused to provide the $1.4 billion loan Virgin Australia requested and international shareholders voted against providing more financial support.
Already, the government has allocated $165 million to help keep Virgin and Qantas flying domestically, as well as a $715 million relief package for the Australian aviation industry and a $300 million lifeline for the regional airlines. So, despite a strong resistance to allow Qantas to have monopoly in the Australian domestic market, the government is urging Virgin to call on their existing shareholders to help them find a way through this.
Administrator Vaughan Strawbridge said they have already commenced the process of seeking interested parties were “progressing well on some immediate steps”.
In the meantime, Virgin Australia will continue to operate its scheduled international and domestic flights and maintain essential freight services. While loyal travellers can find comfort in knowing that Velocity Frequent Flyer is a separate company and is not in administration. What this means is that you will not lose your points.
In March, when travel restrictions were put in place around the globe, the carrier made the call to suspend all international flying and temporarily stand down 80 per cent of their 10,000 staff.
Virgin Group CEO Josh Bayliss said the impact of the COVID-19 pandemic had been catastrophic and that the company was, “hit by a crisis completely outside of its control.”
The Group – who is a 10 per cent shareholder in Virgin Australia – say they remain in constant communication with Virgin Australia and are hoping to assist in the airline’s rescue mission.
“Our intention is to work with administrators and the management team, along with investors and government, to ensure that Australia maintains two airlines,” he said.
“We are determined to see Virgin Australia planes, and their wonderful teams, flying again soon.”
Virgin Group’s founder Richard Branson took to Twitter to make a statement to staff.
“I know how devastating the news today will be to you all. In most countries federal governments have stepped in, in this unprecedented crisis for aviation, to help their airlines. Sadly that has not happened in Australia.”
“This is not the end fo Virgin Australia and its unique culture. Never one to give up, I want to assure all of you – and our competitor – that we are determined to see Virgin Australia back up and running soon,” he added.