Virgin Australia has gone into voluntary administration, putting 16,000 jobs under threat.
The airline, which was already struggling before coronavirus restrictions hit cashflows, will be managed by Deloitte accountants while it restructures and looks for a buyer.
Administrator Vaughan Strawbridge said there were no plans for redundancies and that workers will still be paid their wages, including those on the government’s JobKeeper scheme.
Raising hopes that the airline will be bought quickly, he said there were ‘in excess of ten companies with a keen interest in being part of the restructuring’. Private equity firm BGH Capital is thought to be among them.
But there are fears the restructure will involve scrapping less profitable routes, particularly to regional areas, meaning flag carrier Qantas will be the only provider and could increase fare prices.
In an emotional press conference at Sydney Airport today, tearful Virgin employees begged for Prime Minister Scott Morrison to save their jobs after the government said it would not buy a stake in the company or give it a $1.4billion loan.
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In a message to the Prime Minister, he said: ‘Sir, I could not do your job and I don’t envy you, but please let me do mine. Don’t clip our wings.’
A young flight attendant called Flynn said: ‘Virgin Australia is our family. Without it, it’s like we are losing a family member.’
Virgin Australia is ten per cent owned by billionaire Sir Richard Branson, who is battling to save his UK business Virgin Atlantic.
He has asked for a $500million (AUD$1billion) loan from the UK government and offered his his own private Caribbean island of Necker – estimated by Forbes to be worth £80m (AUD$160m) – as collateral.
In a letter to Virgin Australia employees, Sir Richard, 69, said he was ‘so proud’ of them and added: ‘This is not the end of Virgin Australia. I believe in a new beginning.’
Virgin Australia, which was already struggling with $5billion in debt before coronavrius grounded its planes, asked for a $1.4billion government loan – but the Coalition government was unwilling to risk such as vast amount of taxpayers’ cash.
Treasurer Josh Frydenberg said today that voluntary administration represented an ‘opportunity’ for Virgin to strengthen. Other Australian companies such as Network Ten have successfully navigated administration, he added.
Referring to the 2002 collapse of Aussie airline group Ansett, he said: ‘This is not liquidation. This is not Ansett. This is not the end of the airline.’
He said a bail-out was never on the cards, adding: ‘The Government was not going to bail out five large foreign shareholders with deep pockets who, together, own 90 per cent of this airline.’
Singapore Airlines, Etihad Airways and Chinese conglomerates HNA Group and Hanshan own 20 per cent each.
Virgin Australia could be sold within months
The government has appointed Former Macquarie boss Nicholas Moore to represent it in talks with the administrators, who have said they are ‘confident’ the airline has enough cash to survive the process.
The Labor Party, which has called for the government to buy an equity stake in Virgin Australia, today slammed Prime Minister Scott Morrison for refusing to step in.
Leader Anthony Albanese said: ‘What we’re talking about here is the Australian national interest. If 16,000 people directly lose their jobs, that is 16,000 people who are on the Centrelink queue.
‘It’s about time that Scott Morrison put aside the ideological blinkers and gave the support that is required.’
Mr Albanese said he feared that regional areas will be left behind if a foreign airline, or a stripped-back Virgin, did not fly to smaller airports.
The airline industry has been hammered by the coronavirus crisis which has hastened the collapse of UK regional airline Flybe and US regional carriers Trans States Airlines and Compass Airlines.
Virgin Australia will still operate limited international and domestic flights during administration as executives hope to come out of the process ‘as soon as possible.’
The airline’s frequent flyer program, Velocity Frequent Flyer, is a separate company and is not in administration. Customers will not lose their points.
Virgin Australia CEO Paul Scurrah said: ‘Our decision today is about securing the future of Virgin Australia and emerging on the other side of the COVID-19 crisis.
‘Australia needs a second airline and we are determined to keep flying.’
A last-ditch plea to the government for a $100 million grant for short-term relief was also denied, The Australian reported on Tuesday.
Queensland state Development Minister Cameron Dick said he wanted to see Virgin continue operate flights in regional areas after the administration process.
Regional Australians ‘deserve two airlines and deserve the air to be fair,’ he said.
‘While this is a sad and disappointing day, we haven’t yet reached the end of the runway.’
Virgin Australia employs about 10,000 people and supports another 6,000 indirect jobs.
Most full-time staff have already been temporarily stood down after the air travel and tourism markets around the country collapsed as the virus spread.
But the latest development means their future is uncertain
Cabin crew worker Daniel Pearce said his parents were left in tears by the news his job could be under threat.
The 32-year-old was 13 when Ansett collapsed, putting his father John out of a job and costing his family their home.
He said turning up to be greeted by shattered colleagues in an empty terminal brought about a sense of déjà vu.
‘My dad worked for Ansett for 20 years and my mum and dad were crying on the phone last night because it was bringing back all these memories,’ Mr Pearce said.
‘We were here, just across the terminal, to watch the last Ansett plane come in when I was 13.
‘We lost our house, dad lost eight friends to suicide and I grew up really quick.’
Air-hostess Kara Lee, a mother of one, said she does not want to join queues outside Centrelink.
‘My husband and I have acknowledged that we can’t just survive on his wage, and I don’t want to be relying on government benefits,’ the 30-year-old said.
‘I want to be out there working and contributing, which is also important to be setting an example for my daughter.
‘I am hopeful the government comes to the party, because we’ve seen in Australia you really need two strong competing airlines.
Pilot Ken Winslow, who is among the third generation of his family to work in the aviation industry, said he feared airlines will go under due to COVID-19.
‘No one knows how long it’s going to last. With the previous disaster of September 11 there was an end date, but there isn’t here.
‘It’s hard to see a light at the end of the tunnel.’
It is expected that Virgin Australia’s existing management team will remain in place during the administration period during which the focus will be on debt restructure.
In an open letter to staff globally, Virgin Group founder Sir Richard said Virgin Australia was ‘fighting’ for life.
He said the airline and others in his group need government help in the form of loans to get through ‘this catastrophic global crisis’.
‘We are hopeful that Virgin Australia can emerge stronger than ever, as a more sustainable, financially viable airline,’ he told staff.
‘If Virgin Australia disappears, Qantas would effectively have a monopoly of the Australian skies. We all know what that would lead to.’