Virgin Australia officially in Administration, continues flights

In a statement to the Australian Stock Exchange, Virgin Australia confirmed confirmed it had placed itself into Voluntary Administration. The statement said the move would enable a recaptilisation of the business.

Vaughan Strawbridge, John Greig, Sal Algeri and Richard Hughes from Deloitte have been appointed as the Administrators.

Mr Strawbridge told a press conference, “… we are confident that this will result in a restructuring being achieved in a short period of time. …. We have not changed anything in respect to the operations or the employees. They’re continuing to be employed. There is no plans to make any redundancies. Wages will continue to be paid and those who have been stood down and accessing JobKeeper, the intention is to continue to make those payments available to those staff.” The aim is to sell the business as a whole rather than break it up and sell the various parts. JobKeeper is the Australian Governments wage subsidy payment to businesses during the pandemic.

Mr Strawbridge also said there were more than 10 parties interested in recapitalising the airline. “The intent is to run hard and we can do that because we’ve got a good sophisticated group of interested parties.”

He also confirmed that Virgin’s frequent flyer program, Velocity, is a separate legal entity and is not in Administration. Earlier today Velocity sent an email out to members saying they have paused point redemption for at least 4 weeks, with the expiry date of points being extended by the same length as the pause. Points can still be earned throughout the pause.

Virgin’s CEO Paul Scurrah told the same press conference, “We take comfort from the comments from the Government that this country needs a robust and healthy two-airline market. And because of this procession we’re going through, because of the early decision of our board, that airline will be Virgin Australia. We’ll come back leaner, stronger and fitter, and play our role in making sure that the economy of Australia – which is currently devastated by the impact of COVID-19 — recovers as quickly as it possibly can for all Australians.”

Sir Richard Branson released a video on social media addressed to Virgin Australia staff where he said he was so proud of everyone at the airline and that this would not be the end. “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 for 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.”

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The Guardian Australia reports the Virgin Group was willing to inject another $200-$250 million into the airline in pre-administration talks.

Australia’s Finance Minister, Mathias Corman, told ABC News Breakfast this morning, “Voluntary administration offers the opportunity to restructure and refocus business and underperforming parts of the business. It offers the opportunity for recapitalisation. It offers the opportunity for private sector interest to come forward and buy the business, or assist with the recapitalisation of the business. So there’s a lot of opportunity from here on in to ensure that there is a viable second airline in Australia.”

Catherine King, the Opposition’s Shadow Transport Minister, told the same program, “Most of us lived through the collapse of Ansett. We saw how long it took for Virgin Blue [Virgin Australia’s launch name] then, in those days, to come up as a strong competitor to Qantas. It’s in the national interest that we have two strong airlines. Virgin is now 20 years in the Australian market and, no, I’m not gonna make excuses for some of the poor management decisions that it’s made in the past. But it certainly is the best competitor we have, with 16,000 people working in that sector.”

Queensland’s State Development Minister, Cameron Dick, told a press conference today, “No airline in the world anticipated the worst pandemic in 100 years. This has grounded civil aviation, not just in our country to around the world. But what we do need in this country is two airlines going forward and that is so critical, particularly to regional Queensland. Anyone who remembers what happened when Ansett disappeared knows how catastrophic it was for regional community in our country. And it’s very important that this airline it continue in some form going forward.”

The Australian Treasurer today said about the collapse, “Our objective is a market-led solution. Our objective is two commercially viable, major domestic airlines operating in Australia.”

Meanwhile Australia’s Opposition Leader, Anthony Albanese, has criticised the Federal Government call for a market solution saying “there is no market.” “Labor is absolutely committed to ensuring there’s a viable two-airline system here in Australia. We regard it as absolutely essential to Australia’s future economy. We rely upon domestic aviation to get around the country, whether it’s for work or for recreation, and Australian jobs depend on it.”

Australia’s Prime Minister also spoke about the collapse today. “The voluntary administration process, the treasurer and Deputy Prime Minister have made clear today, the process is a road out. It is a road out and forward into the future to ensure that the airline can emerge on the other side and we can have the strong commercial viable competition between two carriers in Australia which the government believes is very important. It is very important in usual times but even more important as we emerge from the coronavirus economic crisis, ensuring that we have those carriers in place. I think we all understand that and I wish the administrator all the best… I am encouraged by the fact that there are already 10 parties who have expressed interest in working with the administrator regarding Virgin’s future and if we had not taken the actions that we have … what we may have ended up doing is sending $1 billion to foreign shareholders and that was never part of my plan. My plan was always about seeing two viable airlines on the other side, two viable airlines that would be there not just one year from now but five or 10 years from now.”

Former Australian Government Minister Matt Canavan wants the Government to consider supporting Virgin so regional air fares don’t rise in price. Former Australia Deputy Prime Minister, John Anderson, who was also transport Minister at the time of the Ansett collapse, says he is confident he’ll be able to fly on the airline again. He also said that the government did the right thing in not giving Virgin a loan and “Virgin today is not really an Australian airline — its major shareholders, many of them have conflicting interests.”

Mayors of regional communities are also greatly concerned a lack of competition caused by the collapse could greatly increase the cost of fares. Sarah Cook, runs a cattle station (ranch) 130km outside of Alice Springs in Central Australia. She told ABC, “It’s important to us that there’s competition, the price of airfares here in the bush is expensive. We often have to spend $600 to get [her son] one way” to boarding school in outback Queensland.

Virgin Pilot, Daniel Lang was stood down by the airline due to the COVID Pandemic. He is now stacking shelves at Woolworths, one of Australia’s largest supermarket chains. He told ABC “No-one could foresee the severe impact this was going to have on the global economy, let alone Australia’s economy. Unfortunately it will be the travelling public that pays for it, if there is a monopoly left in Australia.”

Another pilot. Andrew Blackstrom, also spoke to the ABC. Mr Blackstrom lost his job when Ansett collapsed, then was hired by Virgin. He told ABC, “You really think about everyone around you — Ansett also had that family atmosphere. As a pilot I could pursue another career somewhere else, whereas ground handlers, people who’ve been there a long time, check-in staff, they didn’t have the options that we did, so you really feel for them. That’s very similar to what we’ve got now with Virgin — you worry for the other people in the family, as well as your own troubles.”

Australia currently has a centre-right Liberal/National Party coalition government at a Federal level. Both Matt Canavan and John Anderson were in the coalition. The Opposition at a federal level is the centre-left Australian Labor Party. Queensland currently has a Labor Government, with New South Wales having a Liberal/National Party government.

Interview with Paul Scurrah on ABC can be found here

Sources: Australian Broadcasting Corporation (ABC) and The Guardian Australia