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Virgin Australia has collapsed into voluntary administration
Virgin Australia has collapsed into voluntary administration after failing to secure government support.
The airline, already in a precarious position, was severely impacted by COVID-19 travel restrictions.
Virgin Australia was forced to slash its domestic flights by 90% and stand down 8,000 of its 10,000-strong workforce.
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Virgin Australia has officially entered voluntary administration.
The airline confirmed the move on Tuesday, saying it 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.” Deloitte was appointed as the voluntary administrators.
Virgin Australia had been severely impacted by the coronavirus pandemic, having to slash domestic flights by 90% and stand down 8,000 of its 10,000 workers. The airline went into voluntary administration after it sought a loan from several places, including state and federal governments, but wasn’t able to.
The federal government refused Virgin's request for a $1.4 billion bailout as it believed it would end up owning the airline.
“We want to see two airlines in the domestic market but we’re not in the business of owning an airline,” Treasurer Josh Frydenberg said, according to the Australian Financial Review. The federal government did, however, give Virgin and Qantas $160 million to continue a few flight routes.
Virgin said it will continue its scheduled flights to transport essential workers and return Australians home.
Virgin Australia Group CEO Paul Scurrah said in a statement the decision was about “securing the future of Virgin Australia Group.”
“Australia needs a second airline and we are determined to keep flying,” he said. “Virgin Australia will play a vital role in getting the Australian economy back on its feet after the COVID-19 pandemic by ensuring the country has access to competitive and high-quality air travel.”
The administrators said they want to refinance and restructure the business so they can bring it out of administration as soon as possible.
Administrator Vaughan Strawbridge said in a statement, “We have commenced a process of seeking interest from parties for participation in the recapitalisation of the business and its future, and there have been several expressions of interest so far.”
The Queensland and New South Wales government offered their support to Virgin
The Queensland government offered Virgin a $200 million support package under conditions such as its headquarters remain in the state, and the airline received backing from the federal government. New South Wales premier Gladys Berejiklian had also confirmed the state was considering a bailout for the struggling airline.
Virgin Group founder Sir Richard Branson wrote an open letter to the Virgin Australia team saying he was "determined to see Virgin Australia back up and running soon."
"This is not the end for Virgin Australia and its unique culture," he said. "We will work with Virgin Australia’s administrators and management team, with investors and with government to make this happen and create a stronger business ready to provide even more value to customers, competition to the market, stimulus to the economy, and jobs for our wonderful people."
