Virgin credits, points wiped out if airline collapses

The COVID-19 pandemic has pushed Virgin Australia to the brink of collapse, and with no white knight on the horizon, about $2 billion in flight bookings and billions more points are all but certain to be lost.

A WHITE knight investor is unlikely to rescue the Virgin Australia Group from collapse despite Australians holding up to $2 billion in flight credit with the struggling carrier.

The COVID-19 pandemic has forced the grounding of almost all the Queensland-based carrier’s aircraft and pushed it to the brink of collapse.

University of New South Wales School of Aviation professor Tony Webber said the airline’s cash-strapped shareholders would not save the business, leaving financial support from the Australian Government as Virgin’s last hope.

Dr Webber revealed hedge funds and investment banks had sought his views about investing in Virgin Australia, but he doubted a transaction would occur.

“They are doing the sums on whether they could snap it up for a bargain,” he said.

“If I was an investor there’s no way I’d put my money into them.

“I just don’t see any entity that would do that … there’s just too much debt on its books and significant fixed costs you have to meet.”

Grounded Virgin Australia planes at Brisbane Airport.

Dr Webber’s analysis found Australians hold about $2 billion in forward flight bookings and billions more in Velocity Points, which are all but certain to be lost if the airline does collapse.

“You can write off Velocity Points, say goodbye to that,” he said.

The industry expert suggests people should “burn them” on buying items online.

“Just try and get a product out of them, get yourself a frying pan,” he said.

On Wednesday Virgin Australia Group managing director Paul Scurrah refused to speculate on voluntary administration or whether the company would have enough cash to pay entitlements.

Private frustration was building within the Government this week over what it believed were “strong arm” tactics and bluffing by the airline.

Prime Minister Scott Morrison yesterday said Virgin was looking in the market for support.

“Any responses the Commonwealth government will have will be done on a sector-wide basis, and that's the way we will continue to pursue those issues,” he said.

“I’m aware that there are many market-based options that are currently being pursued, and I would wish those discussions every success.”

Virgin Australia managing director Paul Scurrah.

Virgin on Thursday announced a further seven-day trading halt for its shares to continue talks on financial aid and restructuring alternatives to help it weather the crisis.

But the airline didn’t identify who the talks are with.

Reuters reports Virgin is also in talks with creditors about debt restructuring options such as a debt-for-equity swap and has hired UBS, Morgan Stanley, Houlihan Lokey and Deloitte as advisers.

A person with knowledge of the matter told the news agency that entering voluntary administration was a last resort but the airline believes it needs a decision on government aid by next week.

– With AAP