Virgin Australia Administrators Have Now Stopped Issuing Credit/Refunds For Cancelled Flights

Customers of Virgin Australia might be in for a rude awakening after their flight has been cancelled as the administrators of the pretty much bankrupt airline have now formally stopped giving any credits or refunds.

Virgin Australia entered voluntary administration two weeks ago, trying to restructure the company that is burdened with more than A$5 Billion in debt.

In order to “shield themselves from liability” the administrators (Deloitte) have made the decision to at least temporarily stop all kind of refunds for cancelled flights.

The Guardian reported yesterday that the administrators are currently seeking a solution and that previously issued vouchers would retain it’s value.

Administrators of Virgin Australia have stopped issuing refunds and flight credits to customers who cancel their trips.

In an email sent to customers who requested a refund or a credit, the airline said it had “temporarily paused issuing new travel credits and refunds while we wait for direction from the administrator”.

The move is understood to be designed to shield the administrators – Deloitte partners Vaughan Strawbridge, John Greig, Sal Algeri and Richard Hughes – from personal liability for the credits and refunds.

A Deloitte spokesman declined to say how many customers were affected or how much their flights were worth.

“Since the appointment of the administrators, they have been logging customer requests for refunds and credits while they work on a solution for affected customers,” he said.

“The administrators will be able to provide more certainty on arrangements for those customers in coming days.”

He said the administrators hoped to have a solution in place within a week and flight credits issued before the Virgin board appointed administrators on 20 April remained valid.

Under insolvency law, the administrators are personally liable for debts they accumulate while in charge of the airline. …

The administrators are trying for a quick sale of the airline, which had debts of about $6.8bn when it collapsed.

Virgin Australia’s directors decided to call in administrators on the afternoon of 20 April, after the federal government rejected its bid for a $200m bailout. …

The article mentions that there will be no refunds if the customer cancels the flight but currently the major reason no flights are going is because flights are cancelled by Virgin Australia themselves. So what about these customers?

There is a specific compensation page Virgin Australia has posted in addition to COVID-19 pages.

Due to the current unprecedented situation regarding COVID-19 (coronavirus), your right to obtain a refund or compensation in respect of flight cancellations may be impacted during this time. We have created a dedicated page to let you know how we can assist you during this time. You can access the page here. The ACCC has also published some information for consumers about COVID-19 (coronavirus). You can read this here.

You may be entitled to the assistance set out in this policy where you have a confirmed and/or ticketed reservation on a Virgin Australia flight and we need to make a change to your reservation before or on your day of travel.

If we need to change or cancel your flight prior to your travel date, we will either contact you or your travel agent will contact you using the contact details provided in your booking (which may be by phone, text or email) to advise you or your nominated booking contact of the change to your flight details.

If the new flight time is not suitable to you:

• You can contact our Guest Contact Centre or your nominated travel agent to request a different flight time. We will use our best efforts to move you to another Virgin Australia service which is acceptable to you without charge.
• If we cannot make suitable alternative arrangements, you may request a Travel Bank credit or a refund of the total price you paid for your impacted flight by contacting our Guest Contact Centre or your travel agent

You may be entitled to claim compensation for reasonable costs you incur as per section 8 or under the Australian Consumer Law.

Virgin Australia’s COVID-19 related website outlining change/cancellation details can be found here.

From various posts on Twitter however it seems the administrator has sent notices to those customers whose flight got cancelled by the airline as well, therefore invalidating or at least going over the policies outlined on the carriers website.

We have not seen such an email yet but if true and the administrators deny refunds and credits to ALL customers and not just those cancelling on their own then the Guardian articla would be incorrect.

Conclusion

I don’t see this administration cum bankruptcy cum sale of Virgin Australia going very well as far as consumers are concerned. While the airline looks at a sale by the end of June it’s highly unlikely they will find any private equity, takeover offers of capital from financial markets to operate. Unless the Australian Government would take a major share (much higher than the initial $200 Mio requested – try two billion maybe) the airline will fold and current tickets as well as credits would be essentially lost.

I say essentially because customers could of course register as a creditor with the administrator/bankruptcy court but they would be at the end of the foodchain. Who is having a guaranteed full payout here will be the administrators of Deloitte. Those who have already gotten a haircut when Ansett Australia went bust know what awaits them in that case.