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Virgin Australia on brink of collapse, 16,000 jobs on the line

Melbourne, Australia: March 26, 2018: Virgin Airlines Australia airplane on the runway at Tullamarine Airport in Melbourne. Virgin Australia Airlines is Australia's second-largest airline after Qantas.
Virgin Australia has entered voluntary administration. Image: Getty

Australia’s second biggest airline, Virgin Australia (VAH.AX), has become the first large corporate coronavirus casualty, announcing it will enter voluntary administration on Tuesday morning.

The decision follows crisis talks held on Monday evening after the airline failed to secure a desired $1.4 billion lifeline from the federal government.

In a statement to the ASX on Tuesday morning, Virgin Australia said it had named Deloitte as voluntary administrators.


“Our decision today is about securing the future of the Virgin Australia Group and emerging on the other side of the Covid-19 crisis,” Virgin Australia CEO Paul Scurrah said.

“Australia needs a second airline and we are determined to keep flying. Virgin Australia will play a vital role in getting the Australian economy back on its feet.”

Virgin Australia employs 10,000 workers and another 6,00 people indirectly. It also has more than 10 million members of its Velocity loyalty program.

Velocity Frequent Flyers is not in administration as it is a separate company.

Administrator Vaughan Strawbridge said Deloitte plans to restructure and refinance the company to bring it out of administration “as soon as possible”.

He said they are seeking interest from those interested in the recapitalisation of the business and “there have been several expressions of interest so far”.

Virgin Australia will continue to operate its scheduled flights to bring stranded Australians home and transport essential workers.

Failed bid to save the airline

Virgin Australia has been begging the federal government to bail it out after the combination of a $4.8 billion debt burden and the coronavirus pandemic became too much.

The airline halted all international travel and most domestic travel in March and stood down 80 per cent of its workforce.

However, the Australian federal government refused to intervene beyond a $715 million aid package for Australian airlines.

Speaking on Tuesday morning, opposition leader Anthony Albanese said the government needs to step in to save the airline in order for Australia to have two large competing airlines.

And he warned that if Virgin Australia remains in administration, there will be negative outcomes for the Australian public.

“Let's be very clear about what the history of private equity firms is. Quite often, it's about coming in, stripping assets and turning a profit for the private equity firm. It's not about the national interest,” he said.

The Australian Council of Trade Unions (ACTU) has also called on the federal government to intervene in order to save the 16,000 jobs.

“If the Morrison government does not immediately intervene, they will be responsible for the biggest airline collapse in Australia’s history,” ACTU president Michele O’Neil said.

“16,000 workers and their families have been abandoned by the government.”

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