Virgin Australia has entered voluntary administration.
In a statement to the ASX, the airline said the move would help “recapitalise the business” and ensure it emerged “in a stronger financial position on the other side of the COVID-19 crisis”.
The board of directors has appointed Deloitte’s Vaughan Strawbridge, John Greig, Sal Algeri and Richard Hughes as voluntary administrators of the company and a number of its subsidiaries.
Velocity Frequent Flyer, while owned by the Group, is a separate company and is not in administration.
The airline will continue to operate its scheduled international and domestic flights.
Australia’s troubled second airline, which saw its cash flow collapse because of tough coronavirus travel restrictions, is saddled with around $5 billion debt.
It has already stood down 80 per cent of its direct workforce and announced 1000 redundancies in the past few weeks.
- Related: Virgin Australia on the brink
The airline called in the administrators after the Federal Government refused to step in with a $1.4 billion loan, despite repeated pleas from company management.
Virgin has also been in talks with the New South Wales and Queensland state governments, but is yet to secure support.
‘Australia needs a second airline’
Administrator Vaughan Strawbridge said several parties had expressed interest in the business and they were “progressing well on some immediate steps”.
“Our intention is to undertake a process to restructure and refinance the business and bring it out of administration as soon as possible,” he said.
“We have commenced a process of seeking interest from parties for participation in the recapitalisation of the business and its future, and there have been several expressions of interest so far.”
“In 20 years, the Virgin Australia Group has earned its place as part of the fabric of Australia’s tourism industry,” Virgin chief executive Paul Scurrah said.
“We employ more than 10,000 people and a further 6000 indirectly, fly to 41 destinations including major cities and regional communities, have more than 10 million members of our Velocity loyalty program, and contribute around $11 billion to the Australian economy every year.
“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.”
Virgin’s board said the COVID-19 pandemic had hit as the Group was progressing on a “significant transformation program”.
This would have reset its cost base by “consolidating its workforce, simplifying the fleet, withdrawing from unprofitable routes and reviewing and renegotiating supplier agreements”.
Richard Branson vows to ‘never give up’, have airline ‘back up and running’
In a statement to staff, Virgin Group boss Richard Branson said the airline had brought competition and lower airfares to Australia’s skies.
Virgin Group is a 10 per cent shareholder in Virgin Australia.
“I know how devastating the news today will be to you all,” Mr Branson said.
“In most countries federal governments have stepped in, in this unprecedented crisis for aviation, to help their airlines. Sadly that has not happened in Australia.”
But he said he was “never one to give up” and that the Group was “determined to see Virgin Australia back up and running soon”.
“This is not the end for Virgin Australia, but I believe a new beginning.”
Virgin Group CEO Josh Bayliss said the impact of the COVID-19 pandemic had been catastrophic.
“In addition to the human suffering and loss, it has caused extreme business and financial disruption,” he said.
“It’s unlike anything the airline industry has ever seen before. Virgin Australia has been hit by a crisis completely outside of its control.”
He said the Group remained in constant dialogue with Virgin Australia, “focusing on playing our part in the rescue of the airline”.
“We are determined to find a way through this situation to keep the airline going,” he said.
“We want to see a continuation of the unique culture and spirit which has brought much-needed competition to Australia’s aviation market, providing vital connectivity for the country.”
He said a Qantas monopoly in the Australian domestic market would have “serious adverse consequences” for customers and the industry.
“Our intention is to work with administrators and the management team, along with investors and government, to ensure that Australia maintains two airlines,” he said.
“Australia remains a key market for the Virgin brand and we wish to support Virgin Australia to become more resilient and stronger than before.
“We are determined to see Virgin Australia planes, and their wonderful teams, flying again soon.”