Virgin Australia getting ready to enter voluntary administration, according to reports
According to a report by Australian media on Monday (Apr 20), Virgin Australia Holdings is getting ready to enter voluntary administration, as the down-and-out company is unable to stand its ground against the economic effects of the COVID-19 pandemic and mitigate its crushing A$5 billion (US$3.2 billion) debt.
Australia's second-largest airline, with roughly ten thousand people in its employ, has suspended the trade of its stocks and initiated talks regarding financial aid and restructuration options. The airline had asked for a A$1.4 billion loan from the Australian government and entered debt-restructuring negotiations with lenders.
Virgin Australia had already suffered heavy financial losses for seven years straight prior to the pandemic, and according to the reports, Deloitte will likely be appointed as the administrator. Both companies declined comment.
Under Australia's voluntary administration process, the airline is allowed to sell its assets, restructure loans, write off dept and/or dissolve the business.
A proper declaration about the process is believed to be announced on Tuesday (Apr 21), as the Australian media outlet stated without revealing a source.
On the global scale, losses for the airline industry due to the healthcare crisis are currently estimated at around US$314 billion and prompted warnings that top operators will go under without financial aid from governments.
The lion’s share (over 90 percent) of Virgin Australia's shares are owned by an investment group that includes Singapore Airlines, Etihad Airways, Chinese conglomerate HNA Group and Richard Branson's Virgin Group, all of which have endured a massive plunge in revenue on account of the global crisis.
On Monday (Apr 20) Branson said in a blog post that he hoped Virgin Australia could emerge "stronger than ever, as a more sustainable, financially viable airline."
"If Virgin Australia disappears, Qantas would effectively have a monopoly of the Australian skies," he added.
Previously considered an economy-class airline, Virgin Australia moved upmarket to go up against the bigger competitor Qantas Airways for business-class consumers under the administration of Chief Executive John Borghetti, but it has unfortunately the losses continued to pile up. It had reported an A$88.6 million net deficit for the last six month of 2019.
Paul Scurrah, who took up Borghetti’s position in March of 2019, has been reducing expenses as well as the company’s staff and fleet with an end goal to make the company profitable.
The company continued to accumulate debt under Scurrah, however as it tried to finance the A$700 million buyback of a 35% stake in the frequent flyer program that had been previously acquired by a private equity group when B