Virgin Australia, the 2nd largest airline of Australia could collapse, with a voluntary administration of the company if the state support, of AU$1.4 billion is not got enough quickly, and has halt trading, facing insolvency.
Virgin Australia is considering going into administration, racing against time to find a solution to the airline debt between AU$ 4.8 billions and AU$ 5 billions, reports Australian newspapers, uncertainty grows more at the Australian airline as they asked for a AU$1.4 billion loan as state aid, but the Transport Minister, Michael McCormack, doesn’t want to give a direct cash injection.
“We realise it’s going to be very, very tough for them. COVID-19 is having a devastating effect on regional, domestic and international travel and we want to make sure that our aviation industry is protected,” he told parliament.
He said the government was “absolutely committed to the aviation sector”, referring to a AU$1 billion support package it has already announced.
“The airline has hired insolvency, and turnaround experts at Deloitte to work on restructure scenarios.”, Guardian Australia reports.
Furthermore, the airline halted trading, after reports that they had hired Houlihan Lokey (an investment bank, specialised in restructuring), a rare action done by the Australian Stocks Exchange (ASX).
“The securities of Virgin Australia Holdings (VAH) Limited will be suspended from quotation immediately under Listing Rule 17.2 at the request of VAH, pending the release of an announcement regarding its ongoing financial assistance and restructuring alternatives,” said the ASX.
The airline said it “continues to consider the issues brought about by the Covid-19 crisis including discussions with respect to financial assistance and restructuring alternatives which are ongoing”.
Treasurer of Australia, Josh Frydenberg, said while the airline was a value asset to Australia, “the government could not be solely responsible for keeping it alive.”
“We want to see our major airlines continue to operate in Australia. But, at the same time, the government is not in the business of owning an airline,” he told 9NEWS.
“Our focus has been on industry-wide support, providing relief from various taxes and charges and other regulatory measures and both Virgin and Qantas have been the beneficiary of that.”, he added, and that Virgin Australia should be looking to its major shareholders (Singapore Airlines, HNA Group, Virgin…) for financial help.
The airline has debts since 2015, with yearly +AU$1.6 billion per year, had AU$900 million in free cash, but burned money, while grounding fleet, and employed 10,620 people ahead of the crisis.