Indebted Virgin Australia goes into voluntary administration
CANBERRA, Australia (AP) — Virgin Australia, the nation’s second-largest airline, announced Tuesday it had entered voluntary administration as it seeks to strengthen its finances amid a debt crisis.
Virgin said in a statement to the Australian Securities Exchange that it had appointed a team of Deloitte administrators to “recapitalize the business and help ensure it emerges in a stronger financial position on the other side of the COVID-19 crisis.”
The move came after the Australian government refused Virgin’s request for a 1.4 billion Australian dollar ($888 million) loan.
Rival Qantas Airways argued that it had three times more revenue than Virgin and was therefore entitled to a AU$4.2 billion ($2.7 billion) loan if the smaller airline was not to gain an unfair advantage.
Administrator Vaughan Strawbridge said in the statement: “Our intention is to undertake a process to restructure and refinance the business and bring it out of administration as soon as possible.”
Virgin would continue to operate its scheduled international and domestic flights.
Virgin shares have been in a trading halt for a week due to its debt crisis.
Virgin Australia’s major shareholders are Singapore Airlines and Etihad Airways as well as Chinese investigator conglomerates Nanshan Group and HNA Group. The Brisbane-based airline has 130 aircraft and employs 10,000 staff.
Australian governments and businesses fear that a collapse of Virgin would leave Qantas with a virtual monopoly in Australia’s domestic aviation market.
Finance Minister Mathias Cormann said his government wouldn't consider intervening until “the private sector opportunities have been exhausted.”
"The government is not in the business of owning an airline,” Cormann told Australian Broadcasting Corp, referring for a potential deal in which the government bought equity in Virgin.
“But we do want to see two airlines continue and we believe that the opportunities (are) there out of the administration process for that to happen,” Cormann added.
But opposition lawmakers and union leaders called for the government to bail out Virgin to save jobs and low-price domestic airfares.