Virgin Australia has gone into voluntary administration, threatening up to 16,000 jobs, and now begins the long process to shore up the business so it can keep flying beyond the coronavirus crisis.
The decision comes after Virgin’s international shareholders voted against providing more financial support and the federal government denied requests for a $1.4 billion injection of taxpayer funds.
“Our decision today is about securing the future of Virgin Australia Group and emerging on the other side of the COVID-19 crisis,” CEO Paul Scurrah said on Tuesday.
In the meantime, its scheduled flights will continue to operate.
The airline is struggling under a $5 billion debt pile after its domestic and international business was punctured by restrictions put in place to combat the spread of the virus.
Virgin has operated in Australia for 20 years, employs 10,000 people and supports another 6,000 indirect jobs, and contributes about $11 billion to the national economy each year, Mr Scurrah said.
The four Deloitte administrators appointed on Tuesday will now work on ways to restructure and refinance the business “as soon as possible”.
“We have commenced a process of seeking interest from parties … and there have been several expressions of interest so far,” administrator Vaughan Strawbridge said.
The airline’s frequent flyer program, Velocity, is not included in the administration process, which may provide relief for its 10 million loyalty program members holding a combined $500 million worth of points.
But the future of its staff, many of who have already been stood down, remains uncertain unless Virgin can negotiate successfully through the administration process.
Federal Finance Minister Matthias Cormann said the government was not in the business of owning an airline but agreed Australia needs two major carriers, including Qantas, for the sector to remain competitive.
“There’s a lot of opportunity from here on in to ensure that there is a viable second airline in Australia moving forward,” he said of the administration process.
Virgin is 90 per cent foreign-owned. Singapore Airlines, Etihad Airways and Chinese conglomerates HNA Group and Hanshan own 80 per cent between them while Richard Branson’s Virgin Group holds 10 per cent.
Sir Richard said Virgin Australia was “fighting” for its life and needed government help.
“If Virgin Australia disappears, Qantas would effectively have a monopoly of the Australian skies. We all know what that would lead to,” he wrote in an open letter to staff across the world.
NSW and Queensland were already in talks with the airline about offering conditional support.
Queensland had pledged $200 million so long as it keeps its headquarters in Brisbane while NSW has considered financial support but only if Virgin moved to Sydney.
But on Tuesday, NSW Deputy Premier John Barilaro said keeping Virgin alive gazumped any state rivalry.
“Today it is a different world and we’ll have to work together to save the airline,” he told Seven’s Sunrise program.