Deloitte tightens grip on Virgin

Unions representing Virgin Australia workers have shot down suggestions they are planning to force a change in administrators.

Dick Smith says Virgin Australia was too “risky” an investment for him but he hoped it would become Australian-owned as a result of administration. Picture: Dylan Coker

Unions representing Virgin Australia workers have shot down speculation they are planning to force a change in administrators at next week’s creditors meeting despite questions about ­Deloitte’s independence.

The multinational professional services firm was appointed to handle Virgin Australia’s debt restructuring and recapitalisation this week, with the aim of saving the airline from collapse. 

It’s understood Deloitte won the job over rival insolvency firm KordaMentha, which oversaw Ansett’s administration, as well as Channel 10 and mining company Arrium. 

In the case of Arrium, KordaMentha was appointed in the place of Grant Thornton following a court challenge by creditors, including banks and the Australian Workers’ Union. 

There have been murmurs a similar challenge might be made against Deloitte in favour of KordaMentha by unions representing Virgin Australia’s 16,000 workers, and the airline’s bondholders who are owed $1.8bn.

But the Australian Federation of Air Pilots, the Transport Workers Union and the Australian Licensed Aircraft Engineers Association denied they held any concerns about Deloitte.

An AFAP spokesman said they saw no reason why Deloitte should be replaced, and ALAEA national secretary Steve Purvinas agreed. 

“I’m satisfied that Deloitte’s international connections will have us in a good position to secure a buyer interested primarily in continuing Virgin’s operation,” Mr Purvinas said.

“Changing administrators does not seem to be the focus of union discussions I’ve been involved in. Our main interest is to ensure that Virgin survives.” 

Bondholders represented by law firm Corrs Chambers Westgarth are also understood to be satisfied with the choice of Deloitte as administrator.

As a condition of its appointment, Deloitte lodged a DIRRI or statement of independence and previous associations with Virgin Australia. 

The statement to the Australian Securities & Investment Corporation confirmed Deloitte’s previous work for Virgin Australia, on a taxation matter involving a British employee, a staff wellbeing survey and a number of voluntary liquidations. 

Whether the work constituted a breach of independence was yet to be decided by ASIC, which declined to comment on the appointment on Thursday. 

In 2017, KordaMentha’s independence in the Channel 10 administration was queried by ASIC. The Federal Court ultimately ordered an independent liquidator to review and report on the firm’s prior involvement with the media company.

A spokesman for KordaMentha said the firm had not written to ASIC or anyone else about Deloitte’s independence in the Virgin Australia administration. 

But he noted that Deloitte’s “statement of independence” ran to 11 pages. “If ASIC and ARITA (the Australian Restructuring Insolvency and Turnaround Association) are happy with it, then so is KordaMentha,” he said. 

“After that, only the creditors can appoint a different administrator.” 

Another financial services firm retained by Virgin Australia, Houlihan Lokey, has advertised for expressions of interest in acquiring a “leading airline in the Australian market with a strong domestic capacity market share”.

Among the investment highlights listed are “key strategic assets and infrastructure including aircraft, route network and airport gates/slots built over 20-years”.

The Deloitte administrator, Vaughan Strawbridge, previously said more than 10 sophisticated parties were interested with a transaction expected within two to three months.

Australia aviation veteran and millionaire Dick Smith said he would not be seeking to invest in Virgin Australia, labelling it a “basket case”.

“There’d be absolutely no way I’d get involved. It’s too risky even for me,” Mr Smith said.

“They must have had far too many overheads to have not been making money when Qantas was making a small fortune. It’s a shame because it’s otherwise a very good airline and we need two good airlines.”

He said the government was right not to provide a bailout, and was hopeful the airline could become majority Australian-owned as a result of administration.

“It would be good if someone like (transport magnate) Lindsay Fox bought it. He’s very competent,” Mr Smith said.