Virgin Australia threatens to go into administration due to coronavirus, reports

Struggling airline Virgin Australia is in a race against time to find the funding to keep flying, with reports they’ve hired insolvency experts amid the coronavirus crisis.

After entering a trading halt on Tuesday, Virgin Australia is reportedly considering going into voluntary administration as the airline races against the clock from buckling under a net debt of $5 billion.

The airlines have copped a battering during the coronavirus crisis, and Virgin has already suspended all but one domestic route, stood down 8000 workers and had its credit rating downgraded.

For the second time this month, Virgin was placed in a trading halt on Tuesday morning, asking the Australian Stock Exchange to put the pause in place for at least two days or until it makes an announcement.

The Federal Government has been under pressure to help Virgin Australia, with chief executive Paul Scurrah asking for a $1.4 billion loan to help keep the airline afloat. Without a bailout, aviation experts say Virgin could struggle to exist beyond September.

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The future of Virgin Australia is unclear. Picture: Darren England/AAP

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In a statement sent to news.com.au, a spokesperson for the airline said they were in talks to find an alternative financial restructure if the Government didn’t assist the airline.

“Virgin Australia has requested a trading halt as it continues to consider ongoing issues with respect to financial assistance and restructuring alternatives,” a spokesman for Virgin Australia said.

“This has arisen due to the unprecedented COVID-19 crisis which has particularly impacted the aviation sector.

“Virgin Australia has been keeping the air fair in Australia for 20 years and we want to continue to provide a valuable service to all Australians, the 16,000 people employed directly and indirectly, and enable the broader economy to restart quickly once we emerge from this crisis.”

According to The Guardian, the airline has hired insolvency and turnaround experts at Deloitte to work on restructure scenarios, indicating voluntary administration is on the cards. Virgin Australia declined to comment when approached by news.com.au.

Virgin CEO Paul Scurrah has reportedly asked experts at Deloitte to work on a restructure scenario. Picture: Glenn Hunt/The Australian

Prime Minister Scott Morrison said any public funding for aviation would not be provided to one specific airline, but be spread across the entire sector.

“We haven’t been picking any winners or picking any favourites here,” he told Nine.

“What we have been doing is ensuring sector-wide support, which has been already quite significant for the aviation sector.”

The Government has already confirmed it will provide financial support for regional routes and stump up $100 million to address the cashflow crisis among a dozen small airlines.

Deputy Prime Minister Michael McCormack is now working directly with Qantas and Virgin on ways to subsidise flights between major cities.

Virgin is now only flying one domestic route each day. Picture: Darren England/AAP

“They have already worked together on international routes that are vital not just for bringing people home or getting people to their homes, but also to support much-needed freight and the transfer of medical supplies,” Mr Morrison said.

Treasurer Josh Frydenberg, however, said that while the Government was “committed to the aviation sector” he was unable to confirm if a bailout for a single airline was an option.

“We look at all these issues on an objective basis and again there is still quite a way to go in terms of the aviation sector and some of the challenges that those particular companies you are referring to are working through,” he said.

“We’ve been very consistent in that message that we will support the aviation sector, but we’re doing so with a sector-wide approach and you’ve seen that in the announcements to date.”

Currently, Virgin Australia has just one plane in the air each day, leaving 129 grounded.