Virgin Australia Offered $200 Million Cash Injection

Virgin Australia has been thrown a lifeline offer from the Queensland Government in Australia in the form of a $200 million AUD bailout ($127.8 million USD). This cash injection comes with the stipulation that the airline keeps its headquarters in the state’s capital, Brisbane, and continues regional flights.

Virgin Australia
Virgin Australia has been offered $200 million AUD from the Queensland government. Photo: Virgin Australia.

What is the current state of Virgin Australia?

Virgin Australia, the rival airline to Qantas operating in the Australian aviation duopoly, has been struggling. Even before the current aviation crisis, the carrier was financially precarious and required consistent financial support from its benefactors.

Despite having Australia in its name, the carrier is almost entirely owned by overseas investors:

  • Etihad Airways (20.94%)
  • Singapore Airlines (20.09%)
  • Nanshan Group (19.98%)
  • HNA Group (19.82%)
  • Virgin Group (10.42%)

Some of the above names might be familiar, such as Etihad, who has backtracked from investing in several airlines. HNA Group infamously ran Hong Kong Airlines.

Because of their various financial situations (Singapore Airlines is in the same boat), the carrier is unable to seek help from its owners.

Virgin
Virgin Australia Boeing 777-300ER. Photo: Getty Images

Virgin Australia then turned to the Australian government for help. It requested a staggering $1.4 billion AUD ($890 million USD) bailout, claiming that without these funds, the carrier would go bankrupt in six months, putting 12,000 employees out of work and resulting in a Qantas monopoly.

The Australian government has denied a bailout, fearing the public backlash in bailing out a foreign-owned company. The government said in order to keep things fair it would also need to give Qantas $4 billion AUD ($2.55 billion USD). Qantas has not sought a bailout from the Australian government and has secured a loan against its wholly-owned Boeing 787 fleet instead.

From here, the government did offer several ways for Virgin Australia to earn more revenue. It has mandated several subsidies for domestic flights to keep connections running. The government has also funded Virgin Australia to operate rescue flights (Such as Paris to Brisbane direct!).

virgin-australia-financial-results
Virgin Australia has been speaking to unions about avoiding administration. Photo: Virgin Australia via Facebook.

What is this new bailout?

This morning (local time), the government of the Australian state of Queensland offered Virgin Australia $200 million AUD ($127.8 million USD). This money is contingent on Virgin Australia keeping its headquarters in the city of Brisbane, in a place called the ‘Virgin Village.’ This campus employes over 1000 people and is the hub of the Virgin aviation business in Australia.

It is unknown if this offer is only possible if the other state governments join in.

“The Queensland Government is ready to do its bit to support, offering $200 million towards a national support package to help get Virgin get back in the skies,” Minister for State Development Cameron Dick said to ABC. “But we can’t do it alone, and nor should we, because all parts of Australia benefit from two national airlines.”

According to the ABC, the government has also reached out to the other states to contribute funding in absence of the federal government bailout.

“We know that it can cost up to 25 percent more to fly on single carrier routes, and we want to avoid that at all costs, when we emerge from this crisis,” continued Mr. Dick “Queensland has given Australia both our national airlines, we won’t let them go, or let thousands of families watch their jobs go, without a fight.”

Whether or not the other state governments will come onboard remains to be seen.

Simple Flying reached out to Virgin Australia for comment but has yet to hear back at the time of publishing.

What do you think? Should Virgin Australia be bailed out by the states? Let us know in the comments.

16 Shares: