As we reported last week, Virgin Australia has been trying to find a solution to avert going into administration and has failed to negotiate a bailout deal with the Australian federal and regional governments.
Deloitte has confirmed that it was appointed as the administrator and people working on the case. The airline itself hasn’t, however, made an official announcement yet.
You can access Virgin Australia here.
What appears to complicate the efforts to save the airline is the fact that it is the majority (91%) owned by foreign entities:
- EAG = Etihad
- Singapore Airlines
- HNA is an entity behind Hainan and Hong Kong Airlines that is itself being kept alive by the Chinese
- Nanshan = Chinese conglomerate that purchased its share from Air New Zealand
- Corvina = Virgin Group of which Richard Branson owns undisclosed amount
Here’s an image that Richard Branson Tweeted today:
and here’s part of a blog post that was published by him:
The same is true in Australia, where the brilliant Virgin Australia team is fighting to survive and need support to get through this catastrophic global crisis. We are hopeful that Virgin Australia can emerge stronger than ever, as a more sustainable, financially viable airline. If Virgin Australia disappears, Qantas would effectively have a monopoly of the Australian skies. We all know what that would lead to.
There are risks investing in and running an airline as Virgin Australia, and its shareholders have found out. There is an old saying than the quickest way to become a millionaire is to be a billionaire and start an airline.
I find it very unfortunate that borderline xenophobic undercurrents are trying to frame Virgin Australia as a Chinese and foreign government-owned airline due to the shareholders.
If the Deloitte administrators are successful, and there is a viable business case behind saving Virgin Australia, the current equity holders are swept clean, and the debt holders convert part/all of their holdings into equity. Administrators can renegotiate and reject plane leases that are no longer needed.
It would be bad for the traveling public if there is no competition left within Australia, and Qantas could charge monopolistic prices. International airfares would stay competitive on most city-pairs (perhaps not trans-Tasman).
Let’s hope that Deloitte is successful. Many still remember the last big Australian airline collapse of Ansett back in 2002.