Buyers queue, Virgin may sell ‘in weeks’

Virgin Australia could have new owners in just eight weeks, as more than 10 potential suitors line up for a closer look.

Virgin Australia chief executive Paul Scurrah, left, and administrator Vaughan Strawbridge of Deloitte, centre, in Sydney on Tuesday. Picture: John Feder

Virgin Australia could have new owners in as little as eight weeks, with more than 10 potential suitors lining up for a closer look at the airline after it went into administration.

Virgin chief executive Paul Scurrah said the decision to appoint Deloitte as administrators followed nine knockbacks from the federal government to requests for financial assistance ranging from a $1.4bn loan facility down to a $200m grant.

Despite concerns the airline would still be unable to emerge from administration without government help, Mr Scurrah was not counting on Canberra.

“The government’s made their intentions clear and we will do everything we can to come out of this with great new owners who can capitalise us to the extent that we need to be successful and healthy,” he said. His optimism was shared by employees who admitted feeling apprehensive -initially, but hopeful the move would lead to greater job security.

Melbourne guest services officer Marcella Pirritano said that after 17 years, Virgin Australia was “like family”. “I was shattered and emotional when I heard the news this morning,” she said. “It feels surreal but we’re staying positive, and I know we’ll be a stronger airline on the other side of this.”

The “extraordinary” interest from potential buyers gave administrator Vaughan Strawbridge confidence that a transaction could be completed in as little as two or three months.

He would not be drawn on details of potential buyers, but confirmed there were a number of overseas investors interested.

On the subject of government involvement, Mr Strawbridge said he had been contacted by the adviser appointed by the government to engage with Deloitte, former Macquarie Group chief executive Nicholas Moore.

“I do think government has an important role to play but it doesn’t have to be the decisionmaker,” Mr Strawbridge said.

“We know the parties who are coming forward do have the financial capacity to take this business forward but, as part of that, the government support and involvement is going to be critical around making that successful as well.”

Josh Frydenberg rejected suggestions the government had let down Virgin Australia’s 10,000 workers by not agreeing to a lifeline. The Treasurer said the airline performed a very important role and acknowledged it was “a difficult day for staff”.

Virgin Australia CEO Paul Scurrah arrives for yesterday’s press conference to announce that the airline was entering voluntary administration. Picture: John Feder

“But the government was not going to bail out five large foreign shareholders with deep pockets who together, own 90 per cent of this airline,” Mr Frydenberg said.

Virgin Australia’s largest shareholder, Etihad Airways, said it was disappointed the carrier had to enter into voluntary administration due to the unprecedented challenges of the COVID-19 crisis.

A spokesman said Etihad had invested significantly in the company since 2012 but was unable to on this occasion due to the impact of COVID-19 on its own business.

“We hope that the administration will allow for some form of resumption of service and we remain open for constructive discussions on a potential relaunch of the company,” said the spokesman.

Virgin Group chief executive Josh Bayliss said it remained in constant dialogue with Virgin Australia and was focused on playing a part in the airline’s rescue.

“We are determined to find a way through this situation to keep the airline going for the incredible employees,” Mr Bayliss said.

Qantas also offered its commiserations, saying it was a tough day for the workers at Virgin Australia and its thoughts were with them.

“Like everyone else, we want competition to continue,” said a Qantas spokesman. “When people start to travel again, we look forward to competing once more and continuing to serve Australia.”

Ratings agency S&P Global again downgraded its credit rating for Virgin Australia from CCC to CC, on the basis that unsecured creditors would be forced to accept less value for amounts owed.

Qantas also offered its commiserations, saying it was a tough day for the workers at Virgin Australia and its thoughts were with them. Picture: Lyndon Mechielsen

However, the agency said it did expect that Virgin Australia would emerge from the restructuring and would “continue as Australia’s second-largest domestic airline”.

Mr Strawbridge said it was hoped Virgin Australia could be sold as a single entity rather than break up the group, which included low-cost carrier Tigerair.

The Velocity frequent flyer program was not in administration but would be offered as “part of the package” and all frequent flyer points preserved, he said.

Customers with travel credits could also be reasonably confident they would get to use those vouchers but Mr Strawbridge noted there could be “no guarantees”.

“Ultimately, that’s going to be for the interested party that buys the business,” he said. The -management team headed by Mr Scurrah would continue to run Virgin Australia on a day-to-day basis and Mr Strawbridge said there would be no redundancies.

“We want to retain as many jobs as possible coming through this process,” he said.