**Update on 04/20/2020 @ 22:55 UTC – The Australian Stock Exchange (ASX) has announced that Virgin Australia has gone into voluntary administration.
Virgin Australia has reportedly gone into voluntary administration. The international accounting firm Deloitte has been appointed to lead the process. This news follows months of struggles. No formal notification has yet been lodged with the Australian Stock Exchange. However, it is believed this can occur before 19:00 tonight local time or at the opening of business tomorrow.
There has been a trading halt on Virgin Australia’s stocks, but trading had been due to resume Tuesday morning Sydney time. However, at approximately 17:30 Sydney time on Monday afternoon, news broke that Virgin Australia was about to go into voluntary administration.
Virgin Australia backed into a corner
According to a report in The Australian Financial Review, the airline has been backed into a corner and has no option but to hand over to administrators. Virgin Australia had approached the Australian Government for a USD$890 million loan. This afternoon, the Government formally rejected the application. The rejection had been flagged for some time.
Virgin Australia is likely to keep running its slimmed-down schedule as the administrator, believed to be Deloitte, oversees the sale, and attempts to extract maximum value.
Potential interest in the airline
An international airline and private equity firm have combined forces in an attempt to acquire embattled Virgin Australia. At the close of the business day in Australia on Monday, 20 April, word is filtering out concerning a Virgin Australia board meeting this afternoon.
It’s yet to be confirmed who the international airline is but Richard Branson’s Virgin Group has been ruled out of the race. There is some speculation that it may be Chinese carrier HNA. However, whether that airline can afford it and whether the Australian Government will let the airline take control is another issue.
Qatar Airways and Singapore Airlines are also names being thrown into the mix. The private equity group is rumored to be BGH Capital. At its helm is Ben Gray. Mr Gray was a leading force in APA’s ill-fated takeover attempt of Qantas about 13 years ago.
Years of struggles:
The Australian Government is believed to be following the situation closely. It has resisted funding the airline, preferring to let market forces come into play. The Government is believed to be waiting for the administrator to restructure the airline and see how it plays out before committing any funds.
Virgin Australia has been struggling for some time under a crushing debt burden. The Corona lead travel downturn brought its troubles to the fore. The airline has a fleet of 130 plus aircraft, many of which are leased. There are also 10,000+ employees in addition to a further 6,000 indirect employees whose fate is now uncertain.
The voluntary administration comes despite the Australian Government pumping around USD$1 billion into propping up the local aviation sector.
There is still hope
It has been a long and winding road for the ambitious airline that began its life in the late 1990s as Virgin Blue. The airline received a boost when Ansett Australia collapsed under different circumstances in 2001. Under a new CEO, John Borghetti, the airline shifted focus around ten years ago and transformed into a full-service airline. Many argue that was Virgin Australia’s fatal error.
But that’s all history. There’s hope that most of the employees and assets will transform into a new airline. A lean and re-capitalized airline could be just the thing to shake up the Australian aviation market.
Amongst the disappointment, there’s an opportunity. Nonetheless, it’s a lousy time for Virgin Australia’s employees, and Simple Flying acknowledges those affected by the potential administration in this challenging time.
Myself, I’ve had some fantastic flights with fantastic staff on Virgin Australia. They were the airline’s best asset and will prove a hard act to follow.