“Strip away the debt… you’ve actually got a really good airline with great staff who deliver a fabulous product,” is how Aviation Expert Geoffrey Thomas described Virgin Australia, which went into voluntary administration on Tuesday morning.
Virgin is carrying about $5 billion in debt and had sought federal help to keep operating but the Morrison government rejected a $1.4 billion bailout.
He joined Botica’s Bunch to talk about what now needs to happen for the airline to stay in our skies.
“At the core of it, we need a second airline, it just needs a restructure to occur,” he said. “This has happened many times in the United States, where airlines go into what’s called ‘Chapter 11’, they’re restructured, and they fly out of it much leaner and keener.”
He said that other than a couple of carriers, most US airlines have been through ‘Chapter 11’ several times.
“It’s not something unusual,” he said.
Thing is, Geoffrey said that if a ‘Virgin Australia Mark II’ comes out of this, the company really needs to honour frequent flyer points and tickets that are being held, and not because it’s the right thing to do.
“[It’s] because not only do you need loyal staff, which they’ve got,” he said. “You need loyal customers.”
“If you extinguish those credits, tickets, vouchers or frequent flyer points, then you won’t have any loyalty at all.”
Geoffery said that at the end of the day, the aviation industry needed assistance, and that if there isn’t, we’ll have an even bigger problem just around the corner.
“While we’re talking about Virgin now, in 6 or 7-months’ time, we could be talking about Qantas,” he said.
“No airline can outfly COVID-19 over 12 months, it’s just too devastating to the bottom line.”
Hit PLAY below to listen in