Virgin Australia customers owed refunds to be offered ‘conditional credits’

Administrators for Virgin Australia say thousands of travellers still owed refunds will likely never see their cash again. But not all is a loss.

Administrators for Virgin Australia say thousands of travellers still owed refunds will likely never see their cash again, but will instead be offered travel vouchers.

Whether to honour those vouchers will be a decision for any potential buyer of the collapsed airline.

Deloitte says 19 parties interested in purchasing the airline have been granted access to a data room as of May 11.

Non-binding indicative offers are due on May 15, according to an affidavit published by the Federal Court of Australia on Tuesday.

The airline entered voluntary administration last month, owing creditors nearly $7 billion and the administrators at Deloitte aim to agree a deal with a buyer by the end of June.

Previously, eight parties were believed to have signed confidentiality agreements to gain access to Virgin’s books as of April 30.

Private equity and distressed situation specialists Apollo Global Management, Oaktree Capital Management and BGH Capital are among the firms that have expressed interest in the purchase.

US-based airline investor group Indigo Partners is also believed to be looking at a possible deal.

Virgin Australia has 117 leased planes and engines with monthly rentals of $40 million, of which only 50 are operational due to the low demand brought on by the coronavirus pandemic, administrator Vaughan Strawbridge said in the affidavit.

There have been around 340,000 requests for refunds. Picture: Rick Rycroft/AP

He said the administrators were considering whether Virgin Australia would need interim funding to allow the business to keep operating until a second meeting of creditors, which they propose to hold in August.

The administrators are seeking permission to issue conditional credits to customers that had booked flights cancelled due to the pandemic which could be honoured by an acquirer, Mr Strawbridge said.

“Potential buyers may be motivated to extend these conditional credits as part of any restructuring or recapitalisation of the Virgin Companies’ business for the purposes of maintaining and enhancing the customer goodwill associated with the Virgin Companies,” he said.

He added the airline is seeing a rise in credit card charge-backs from customers seeking refunds. There have been around 340,000 requests for refunds after cancelling 65,000 flights between March 1 and April 30.

That is a potential drain on cash it holds in accounts.

The travel credits will be valid for the administration period, and customers who have not claimed or used the credits during the process are "unlikely to receive a 100 per cent refund on any restructuring or upon liquidation".

Mr Strawbridge said the credits would preserve goodwill in the airline and make it more attractive to potential buyers.