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Virgin Australia will pay out Velocity points in cash if it collapses, with money from a trust

  • Virgin Australia's Velocity points will be paid out to its members if it collapses, the embattled airline has revealed to Business Insider Australia.

  • No matter if the airline is sold or liquidated, a secret trust is in place to protect the program against the worst case scenario.

  • While remaining tight-lipped over how its structured, Business Insider Australia understands special cash reserves have been designated and protected to ensure members aren't left with nothing.

  • Visit Business Insider Australia's homepage for more stories.

While Ansett may have left its frequent flyers high and dry, Virgin insists it's not going to make the same mistake.

On Wednesday, just a day after entering voluntary administration, the beleaguered airline told Business Insider Australia that it had gone to some lengths to protect its 10 million Velocity members if it does not survive.

"Velocity is set up in a way that safeguards member value by having a trustee that looks after the interests of members," Virgin said in a statement.

The reassurance that "members will never just lose points" was issued as a Virgin spokesperson confirmed the company had received "quite a few questions" about the security of Velocity points from nervous members.

As administrators from Deloitte try to overhaul the business into something more sustainable, a trust essentially protects the Velocity program from collapse even if the entire business should fail to fly again.

A spokesperson confirmed the trust would protect those points, currently frozen, in every scenario that Virgin now faces, including collapse or sale to another business.

Business Insider Australia also understands the trust contains special cash reserves that have been put aside to pay out members in the instance the loyalty program cannot continue in some other form. With points typically priced in terms of flights or consumer goods, it's unclear how monetary value will be assigned or whether the total cash lot will be simply divided by the number of points and distributed accordingly.

Virgin wouldn't be drawn on how much cash had been put aside, how much members could receive, or how those points would be valued if the airline did fail. In fact, until recent weeks, in which Virgin has faced the real prospect of liquidation, Business Insider Australia understands many within the company weren't even aware such a cash reserve existed

Given the sensitivities that surround trusts, it's unsurprising the company remains tight-lipped on exactly how it has protected the loyalty program. A collapse would leave a long line of hungry creditors, some of whom would likely never recoup their money.

They will be less than impressed to learn that in case Virgin does go to the wall, a trust would stop them from getting their hands on the company's remaining cash, instead going to the former customers of the airline.