Virgin Australia: Administrators appointed with millions owed to foreign investors
Taxpayer dollars will not be used to bail out Virgin Australia but Treasurer Josh Frydenberg says that doesn’t mean the company will suffer the same fate as collapsed airline Ansett.
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Taxpayer dollars will not be used to bail out Virgin Australia but Treasurer Josh Frydenberg says that doesn’t mean the company will suffer the same fate as collapsed airline Ansett.
Following the announcement Virgin has gone into voluntary administration, Mr Frydenberg said the federal government had appointed former Macquarie chief executive Nicholas Moore to engage with administrator Deloittes on behalf of the commonwealth.
“Our objective is a market-led solution,” Mr Frydenberg said.
“Our objective is two commercially viable, major domestic airlines operating in Australia, and we will work constructively with Deloittes through Nicholas Moore and our Treasury and Finance teams from here.”
Mr Frydenberg said the voluntary administration was an opportunity for Virgin to recapitalise and “come out stronger on the other side of the coronavirus crisis”.
“This is not liquidation,” he said.
“This is not Ansett. This is not the end of the airline.”
Mr Frydenberg said Virgin was a “very good airline” performing a “very important role” and acknowledged today was difficult for its staff and suppliers.
“But the Government was not going to bail out five large foreign shareholders with deep pockets who, together, own 90 per cent of this airline,” he said.
“We will continue to provide support as we have to the aviation sector, and the JobKeeper package will continue to be available to Virgin employees.”
Mr Frydenberg said the government’s objective was to see “two commercially viable airlines operating domestically” in Australia.
“This will be good for jobs, it will be good for competition, it will be good for lower prices and it will be good for the Australian economy more broadly,” he said.
Virgin Australia’s board of directors decided to put the airline into voluntary administration after the Federal Government rejected a final plea for $200 million yesterday.
The airline initially asked for a $1.4 billion loan from the government and went back eight times as talks with potential investors closed the gap to just $200 million.
Chief Executive Paul Scurrah said: “This is a tough day for our airline but it’s certainly not the end, we are certainly not collapsing,” he said.
“Australia needs a second airline and we are determined to ensure we are that second airline.”
He said the intention was to provide as many jobs as possible for existing staff as the airline came “back leaner, stronger and fitter than ever” after the coronavirus crisis.
And he said Virgin boss Richard Branson, who owns 10 per cent of the current airline, “deeply cares about the people here - we would and he would like to be part of the solution here.”
Administrator Vaughan Strawbridge from Deloitte said the airline’s 10,000 employees had been told their jobs were safe as negotiations with potential new investors were carried out.
He said there were “more than 10” very sophisticated interested parties who were expected to have given expressions of interests within three weeks. Those parties include international investors.
“We expect to know that the outcome will be over the next two to three months,” he said.
Mr Strawbridge said the intention was to honour existing flight credits for passengers which formed a crucial part of the good will passengers held for the brand.
Today the NSW government confirmed it was continuing in discussions with Virgin Australia, which it had offered to help fund in return for it moving its headquarters to the new Western Sydney airport.
The news comes as the airline’s flamboyant figure head Richard Branson, who owns 10 per cent of Virgin Australia, has asked the UK Government for a $981 million loan and was prepared to put his private island in the Caribbean up as collateral.
In a statement to the Australian stock exchange today administrator Vaughan Strawbridge from Deloitte said he would be working with chief executive Paul Scurrah to keep the airline in the air.
“Our intention is to undertake a process to restructure and re-finance the business and bring it out of administration as soon as possible,” Mr Strawbridge said.
“We are committed to working with Paul and the Virgin Australia team and are progressing well on some immediate steps. We have commenced a process of seeking interest from parties for participation in the recapitalisation of the business and its future, and there have been several expressions of interest so far,” he said.
Labor leader Anthony Albanese earlier ridiculed the idea of a market response to save Virgin when “this isn’t the result of a market failure.”
He told ABC radio that the government needs to “give consideration to the long term national economic” future of Australia and secure the 16,000 direct and indirect jobs provided by the airline. Virgin Australia also provides an $11 billion boost to the economy and provides strong competition to Qantas to keep down airfares.
And NSW Premier Gladys Berejiklian today refused to say if she was disappointed that the federal government hadn’t stepped in to aid the flailing carrier.
“That’s not a matter for me to comment on but it’s appropriate to see what happens now in the private market,” she said.
Originally published as Virgin Australia: Administrators appointed with millions owed to foreign investors