Hard landing: Cabin crew members standing next to a Virgin Atlantic flight to London. The airline is among the industry’s corporate casualties of the Covid-19 pandemic. — Reuters
SYDNEY: Virgin Australia Holdings Ltd became Asia’s first airline to fall to the coronavirus after the outbreak deprived the debt-burdened company of almost all income.
Administrators at Deloitte, who have taken control of the Brisbane-based carrier, aim to restructure the business and find new owners within months. More than 10 parties have expressed an interest, Deloitte said yesterday.
Virgin Australia joins FlyBe – the United Kingdom’s biggest domestic airline before it collapsed last month – as among the industry’s corporate casualties of the virus. Airlines have been pummeled by domestic and international travel bans that forced them to seek government aid.
Virgin Australia, which has furloughed 80% of its 10,000 workers, will continue to operate some flights for essential workers, freight and the repatriation of Australians. The airline’s frequent flyer programme is a separate company and is not in administration.
Vaughan Strawbridge, one of four administrators at Deloitte, said the airline’s fate should be clear in two to three months. He said he doesn’t plan to change Virgin Australia’s operations or fire any workers.
“Generally, you get the best outcome where you sell it as a whole, so that is definitely the preferred approach, ” Strawbridge told reporters yesterday. There were “a number of very sophisticated parties who have got the capability to be part of the restructure, ” he said.
The fate of Virgin Australia, which had more than A$5bil (US$3.2bil) debt as of the end of 2019, hung in the balance after it stopped virtually all services because of the virus and its request for state help failed. The company had asked the government for a A$1.4bil loan, convertible into equity, to see it through the crisis.
Instead, the government called on the airline’s shareholders to step in. Virgin Australia’s final plea for A$200mil in state aid was rebuffed on Monday, chief executive officer Paul Scurrah said yesterday.
In a letter to Virgin staff on Monday, the British billionaire said his airlines in the UK and Australia wouldn’t survive the crisis without state support. Branson said he was doing everything possible to keep Crawley, England-based Virgin Atlantic Airways Ltd afloat, but it needed a UK-backed loan to ride out the storm.
Virgin Australia’s fight for survival triggered an ugly feud with its larger domestic rival. Qantas Airways Ltd argued Virgin shouldn’t be rewarded with a bailout, while Virgin accused Qantas of spreading false rumours about its ebbing cash position – allegations denied by Qantas.
A voluntary administrator is usually appointed by directors after they decide the company is insolvent or nearing insolvency. Virgin Australia had about A$1.1bil in cash at the end of 2019.
The airline is dominated by Qantas in essentially a two-player market in Australia and hasn’t made an annual profit for seven years.
Qantas shares jumped as much as 7.2% on yesterday before paring the gain to 0.4%.
Virgin Australia’s stock was suspended earlier this month while restructuring talks continued. The shares last traded at less than nine Australian cents apiece on April 4, valuing the company at A$726mil.
Nicholas Moore, a former CEO of Macquarie Group Ltd, will engage with the administrator on behalf of the Australian government to find a “market-led solution” to Virgin’s crisis, Treasurer Josh Frydenberg said yesterday. — Bloomberg
https://www.thestar.com.my/business/business-news/2020/04/22/virgin-australia-collapses
