Virgin Australia has gone into voluntary administration in
an effort to “ensure it emerges in a stronger financial position” when the
Covid-19 pandemic is over.
The company is Australia’s second-largest airline and
suspended almost all flights last month as the pandemic began to grip the
world. According to reports, it was already struggling under the weight of a
long-term £2.55 billion debt.
The group said it had already been progressing on a
transformation programme to reduce costs by consolidating its workforce, “simplifying”
its fleet, withdrawing from unprofitable routes and reviewing and renegotiating
supplier agreements.
Virgin Australia’s board of directors has now appointed
Vaughan Strawbridge, John Greig, Sal Algeri and Richard Hughes of Deloitte.
Their task is to restructure and re-finance the business “and bring it out of
administration as soon as possible”, according to Strawbridge. He also said the
administrators have started the process of seeking new investors in the
recapitalisation of the business and claims “there have been several expressions
of interest so far”.
Velocity Frequent Flyer, while owned by Virgin Australia, is
a separate company and is not in administration.
The airline will continue operating its scheduled international
and domestic flights, which it said are helping to transport essential workers,
freight and Australians repatriating from abroad.
Chief executive Paul Scurrah said: “Our decision today is
about securing the future of the Virgin Australia Group and emerging on the
other side of the Covid-19 crisis.
Virgin Australia Group employs more than 10,000 people and a
further 6,000 indirectly, according to Scurrah. It flies to 41 destinations and
claims to contribute around AU$11 billion (£5.5 billion) to the Australian economy
every year.
Scurrah continued: “Australia needs a second airline and we
are determined to keep flying. Virgin Australia will play a vital role in
getting the Australian economy back on its feet after the Covid-19 pandemic by
ensuring the country has access to competitive and high-quality air travel.”
The news of Virgin Australia’s collapse comes after Sir
Richard Branson, whose Virgin Group owns part of the company, said airlines
will not survive without government support. He said he would raise as much
money against his privately-owned Necker Island estate as collateral for a UK
government loan for Virgin Atlantic.
According to the BBC, Australia had refused a AU$1.4 billion
(£711 million) loan for Virgin Australia, but has recently announced a support
package for all local airlines totalling AU$900 million (£457 million).
Virgin Australia is part-owned by the UAE government,
Singapore Airlines, China’s HNA and the Virgin Group.