Terry McCrann: No way Virgin fleet of 132 will ever fly again under same logo
Virgin’s administrator has made outlandish claims about the airline’s viability, but it’s doubtful many of the 19 groups invited to bid actually will front up on Friday, writes Terry McCrann.
Terry McCrann
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This is not only the week we start our journey out of the lockdowns, it is also the week the combined arm wrestle and poker game gets under way to try to get Virgin the company back into the air, so to speak.
Actually getting the planes back into the air — the most of them apart from the handful still flying — well, is an altogether different matter.
That’s hostage to the virus.
One thing though is, or should be, very clear.
There is no way in the world that all 132 of them are going to ever fly again under the Virgin logo.
That is pure fantasy — which does though seem to exist in the mind of Virgin’s administrator, Deloitte accountant Vaughan Strawbridge.
He’s sent the 19 groups which have expressed interest in bidding to revive Virgin, profit forecasts for Virgin out to 2023 that are in all senses of the word fantastic.
If he’d guarantee them, I’d bid for Virgin.
The bidders are required to lodge indicative offers by Friday with Strawbridge and then the arm wrestle/poker game really gets under way.
It won’t be as crowded a table as suggested by the number of groups jostling in these last few days for a seat.
The smell of massive loan write-offs and the prospect of either or both federal and state government money being injected into the pot brought every main-chancer from anywhere on the planet, at least virtually, down under.
But now that they have to get serious, the actual number on Friday is likely to come down to between three and six — and indeed, some of those could come together either before or soon after the initial offers go in.
Even if we didn’t face an extended future where air travel will be dramatically less than it was just a few months ago, thanks not just to the virus but the massive global economic
destruction that has followed the virus, Virgin would have been facing a huge challenge to get back into the air.
Like with much of the Australian economy, we can’t go back to a pre-virus Virgin which was a strategic play of five overseas shareholders and which was not in itself viable, and even those strategic plays had long ceased to make sense.
It goes without saying that the starting point for any hope of a Virgin Mark II has to be a massive write-off of much of its existing $6.8 billion of liabilities, including about $5 billion of debt.
And that’s only the starting point.
You have to be able to conceive a viable, much slimmed-down operation that has to get off the ground in the context of the virus and the economic damage.
The task is huge.
We’ll see how many actually front on Friday and how realistic their proposals are. Both in terms of cash and what’s proposed for Virgin Mark II.
They will need to be nothing like the Strawbridge fantasy.
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