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Virgin Australia collapses into Voluntary Administration

21 April 2020

Virgin Australia expected to go into Voluntary Administration

Cash-strapped airline, Virgin Australia (Virgin Australia Holdings) enters voluntary administration. This makes the company the first big corporate casualty for Australia, among the coronavirus pandemic.

The company is unable to re-pay any of its A$5 billion debt, ultimately struggling to stay afloat. Even before the pandemic hit, annual losses had been reported for seven consecutive years.

Being Australia’s second-biggest carrier, around 16,000 employees (10,000 employees directly and 6,000 jobs indirectly) are at risk though the airline can continue trading in voluntary administration. Both Unions and workers call out for help to save the company.

Voluntary administration does not mean that it ceases trading or employees loose their jobs, immediately. In such a circumstance the company becomes controlled by a licensed administrator/insolvency practitioner who works to assess the choices the company has and direct them to the most suitable option, whilst acting in the creditors best interests.

Government assistance had been called upon given that 95 per cent of air travel has stopped. However, both the NSW and Queensland governments failed to acquire enough cash to rescue the grounded airline. Now help is urgently required from new buyers and investors; private equity groups expected to be interested.

Paul Scurrah, Virgin Australia Chief Executive 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. Australia needs a second airline and we are determined to keep flying."

Deloitte announced their appointment. They intend to try and restructure the firm's debt, pay off creditors and find a buyer. 

The airline is majority owned by a group of investors including Singapore Airlines, Ethiad Airlines, HNA Group (a Chinese conglomerate) and Richard Branson’s Virgin Group. All investors have not yet provided comment;  only Branson shared in a blog post how he was hopeful that the airline would become “stronger than ever, as a more sustainable, financially viable airline”. He reassures all of his determination ''to see Virgin Australia back up and running soon''.

Unless the airline is saved, national carrier, Quantas, will hold a near-monopoly in Australia. Consumer groups and local politicans have voiced concerns on this. The long term loss of the company would be seen a big blow to Australia's tourism industry, hard hititng GDP.

Categories: What is administration

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