Airport owners make peace with Virgin over liability

The nation’s biggest airport owners have resolved a key issue with Virgin’s administrators, Deloitte.

Virgin Australia’s administrator has struck a deal with airports

The nation’s biggest airport owners have resolved an issue with Virgin’s administrators, Deloitte, that could have seen them oppose an application to the Federal Court on Friday to limit their personal liability for its debts.

Law firm Thomson Geer had been briefed on Thursday to appear on behalf of a number of airport owners who believed Deloitte should bear the burden of personal liability for using their facilities during the administration process. But the issue was resolved on Thursday evening.

Virgin has agreements with major airports across Australia to use terminal gates, public spaces and facilities and has subleases for Virgin Group airport lounges.

The airport operators among the airline’s creditors include Melbourne Airport owner Australia Pacific Airports, Sydney Airport Corporation, Brisbane Airport Corporation, Canberra Airport, Gold Coast Airport and Perth Airport.

The administrators have asked the court to consider that their personal liability be limited where the airline needs to enter into new contracts required to maintain operations during the administration process.

Such an application is not unusual in voluntary administration situations.

On Wednesday the court granted a limitation of liability to Deloitte in relation to an existing charter contract with Rio Tinto.

But it will rule on Friday morning whether the administrator’s personal liability could be limited in respect of current and future contracts, as well as the federal government’s JobKeeper program and intercompany loans.

On Wednesday the commonwealth Attorney-General and the Australian Taxation Office sought to intervene in the proceedings in relation to JobKeeper payments to Virgin staff and the federal government’s Fair Entitlements Guarantee scheme, which pays workers’ entitlements if their bankrupt employer cannot.

If Virgin falls into liquidation its nearly 10,000 workers would be owed at least $600m in unpaid wages, leave and other entitlements under the FEG scheme, while 6000 indirect employees would be owed around $200m.

The administrators also want to avoid personal liability for payments under the federal government’s coronavirus wage relief subsidy, JobKeeper.

More than 8200 of Virgin Australia’s 10,000 employees have claimed a total of $24.8m in JobKeeper payments.

On Wednesday the court endorsed extending the administration period to August 18, which will defer a second creditors meeting that was scheduled for the last week of May.

It also endorsed a policy proposed by the administrators where all customers who booked flights before Virgin entered administration and are yet to receive a refund or credit will be given a “conditional travel credit” of the same value.

Virgin has received about 340,000 requests for refunds after cancelling 65,000 flights between March 1 and April 30.

Virgin systems will be ready to process requests in coming days.