Coronavirus: Virgin Australia owners must do their share to save it, says Josh Frydenberg

The government is putting pressure on Virgin Australia’s shareholders to step up to save the embattled airline.

Virgin Australia chief executive Paul Scurrah in Brisbane. Picture: Glenn Hunt

The federal government has increased pressure on Virgin Australia’s shareholders to step up for the embattled airline, after ruling out a company-specific $1.4bn assistance package.

Josh Frydenberg on Wednesday repeated calls for shareholders to be Virgin Australia’s first point of call instead of Australian ­taxpayers.

The Treasurer’s comments followed discussions between Scott Morrison and Singapore Prime Minister Lee Hsien Loong, who suggested his country’s airline was not in a position to assist Virgin.

Singapore Airlines recently organised $21bn in finance to see it through the coronavirus crisis.

The carrier is among five major shareholders in Virgin Australia, along with Etihad Airways, Nan­shan, HNA Group and Richard Branson’s Virgin Group. Together they control 90 per cent of the Australian airline, but all but Mr Branson have ruled out any financial assistance.

The British billionaire has pledged $390m of his $6.4bn fortune to the Virgin empire, with the bulk of that expected to go to ­Virgin Atlantic.

As the closest shareholder geographically, Singapore Airlines has perhaps been under the most pressure to help out its Australian partner, which provides a strong domestic network for its own passengers Down Under.

Majority owned by the Singapore government’s investment arm, Temasek Holdings, which manages a $313bn portfolio, the airline was always going to see out the crisis, despite being one of the hardest hit. But after organising $21bn in finance through a share offer, convertible bonds and a bridging loan, Singapore Airlines denied it was preparing to buy or bail out Virgin Australia.

In a further blow to the friendship, Singapore even put a stop to Virgin Australia frequent flyers converting their Velocity points to those in its own loyalty program, KrisFlyer.

With the largest stake in Virgin Australia of 21 per cent, Abu Dhabi’s Etihad could have been expected to step up for its partner of 10 years. Based in one of the richest cities in the world with a leader (Sheik Kalifa bin Zayed) worth $28bn, Etihad fostered an upmarket image.

In reality, the airline was in grave financial strife after a series of poor investments in carriers such as the now-defunct Air Berlin, the destitute Jet Airways and troubled Alitalia.

In 2019, Etihad recorded a loss of $1.3bn, taking its losses since 2016 to $8.7bn.

Then there are the two Chinese conglomerates, HNA Group and Nanshan Group, which together hold 40 per cent of shares in Virgin Australia.

HNA is in the process of restructuring after intervention by the Chinese government to save the company, which reportedly has debts of more than $100bn.

Nanshan Group was ranked 176 on a list of China’s top 500 enterprises in 2019 but it does not appear keen to help Virgin.

The grim scenario facing Virgin Australia has seen chief executive Paul Scurrah call in insolvency and turnaround experts from Deloitte to work on restructuring the airline’s $5bn debt.

With Virgin Australia in a trading halt, an announcement about its future is expected on Thursday.