Virgin Australia engine stoush turns to farce

A legal battle over the return of four jet engines leased by Virgin Australia has descended into comedy.

Virgin Australia’s fight with lessors over the return of four Boeing 737 engines has descended into comedy. Picture: Darren England/AAP

A court case over four aircraft engines leased by Virgin Australia has descended into comedy with the lessors now accused of refusing to take back their property.

Wells Fargo and Willis Lease Finance Corporation filed court action against the airline in June demanding the return of their Boeing 737 engines to Florida in the US by October 15.

The Federal Court ruled in their favour but Virgin Australia’s administrators then appealed on the basis of the significant cost to the airline and the precedent it would set for other lessors.

The Full Court of the Federal Court upheld the appeal and sent the matter back to Judge John Middleton to decide the best way forward.

But last week the lessors filed a new application, seeking orders to make Virgin Australia responsible for the engines’ maintenance and insurance, until they could appeal the matter in the High Court.

The move stunned administrators who questioned why the original application’s stated urgency no longer seemed to matter.

In a submission to the Federal Court, the administrators said the lessors had now declined to take possession of the property despite being provided with several opportunities.

A letter dated October 26 proposed the lessors collect the engines from Melbourne Airport by November 6, or pre-pay for the administrators to freight the items to Florida.

A third option would involve the lessors paying $1000 a week for storage at the airport until the matter was resolved.

“None of these alternatives has been accepted by the lessors, who instead press for what they describe as the preservation of the ‘status quo’ via a ‘stay’ or, effectively, a mandatory injunction compelling (Virgin Australia) to preserve and maintain the engines for an indefinite period at the (airline’s) cost,” said the administrators’ submission.

“While the lessors have foreshadowed an application for special leave to appeal to the High Court, crucially, some three weeks after the Full Federal Court decision was handed down that application has not yet been filed or served.”

The administrators said the matter should not even be heard in court as it was “wholly premature and doomed to fail”.

“The application should only be timetabled for hearing when a special leave application (to the High Court) has been filed,” said the submission.

The matter will be heard by Justice Middleton on November 10, at the same time as another application by the administrators seeking to have all shares in Virgin Australia transferred to Bain Capital, in order to complete the sale transaction.

The carrier is continuing to move closer to relaunch, with an application to the Australian Competition and Consumer Commission to resume their partnership with Alliance Airlines.

According to the application, the partnership would help Virgin Australia operate a regional network of 40 routes and compete with Qantas.

“Regional services are an important part of Virgin Australia’s network and it remains committed to serving regional destinations in support of communities and businesses,” said the application to the ACCC.

“However they cannot efficiently operate regional services alone. By co-operating on the relevant routes, (Virgin Australia and Alliance) can efficiently offer a more compelling product, providing choice and convenience for consumers and competition for Qantas.”

It’s understood Alliance would not operate all 40 routes for Virgin Australia, because it does not have the capacity to do so.

However the airlines’ fleet of Fokker 50s and 100s are considered more suited to those routes, then Virgin Australia’s Boeing 737s.

Alliance will also begin taking delivery of 14 Embraer 190 jets from Thursday, which are expected to be used in charter operations.