Virgin Australia Administrator: Customers Likely Won’t Ever See Their Cash For Cancelled Flights Again

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Bad news came quickly for customers of Virgin Australia as the administrators of the bankrupt airline have just announced that no refunds for cancelled flights would be forthcoming.

Just a week ago administrators have formally stopped giving any credits or refunds for cancelled tickets and they have now clarified that any refund that would eventually be given out will come in the form of credits only.

This comes with the further caveat that the new owner of Virgin Australia is not even obligated to accept these credits as valid form of payment which means customers could be entirely out of pocket for their remaining tickets,

The Sydney Morning Herald reported the bad news this morning.

Thousands of travellers owed refunds for cancelled Virgin Australia flights may never see their cash again and will instead be issued with travel vouchers under a plan proposed by the airline’s administrators.

Virgin stopped giving refunds or travel credits for cancelled flights when it collapsed last month with debts of nearly $7 billion, after the COVID-19 pandemic forced it to ground almost its entire operations.

Accounting firm Deloitte’s lead administrator Vaughan Strawbridge wrote in an affidavit filed to the federal Court on Tuesday that Virgin has received about 340,000 requests for refunds after cancelling 65000 flights between March 1 and April 30 due to the pandemic. …

On the refunds front, Mr Strawbridge said while some customers would normally be eligible for cash refunds, Deloitte has proposed a policy where all customers who booked flights before Virgin entered administration and are yet to receive a refund or credit will be given a “conditional travel credit” of the same value.

The travel credits will be valid for as long as the airline is in administration, with the process expected to run until mid-August, and the policy warns that it “may not be possible or practical” for Virgin to resume normal flights by then.

Customers who have not claimed or used their credits will be treated as unsecured creditors in the administration process and are “unlikely to receive a 100% refund on any restructuring or upon liquidation”, the court application said.

“The Conditional Credit scheme offers those customers the possibility of realising 100% of the value of their refund by using the credit on a future flight or holiday package,” it says.

Whether Virgin honours flight credits or gives refunds after the administration period will be a decision for its new owners. Virgin’s normal refund and credit policies apply to all tickets booked after it entered administration.

This is going exactly the bad way I imagined when writing about this process last week. There hasn’t been very great history in Australia when it comes with airline bankruptcies and consumer protection. Back when Ansett Australia went bust consumers also lost everything.

At the moment there is however an interesting entity looking to buy Virgin Australia or at least a large stake of it.

As ABC News reports the move by the Queensland government to place a bid for Virgin Australia was met with reactions on both ends, ranging from shock horror to support.

The state-owned Queensland Investment Corporation (QIC) is set to make an official bid for a stake in Virgin Australia after the airline went into voluntary administration last month amid the coronavirus travel restrictions.

Queensland Treasurer Cameron Dick released a statement confirming the move to save the airline and retain its headquarters in Brisbane.

Mr Dick said it could take the form of a direct equity stake, a loan, a guarantee or other financial incentives.

Minister for Home Affairs Peter Dutton said in a post on social media the move was “laughable”.

“Premier Palaszczuk has almost bankrupted Queensland, and now in the middle of a crisis they want to buy an airline,” Mr Dutton wrote in a tweet.

“She ‘leads’ (sic) a government which is corrupt and chaotic.”

However, Assistant Minister for Superannuation Jane Hume said Queensland’s bid could be part of a “viable option”. …

Mr Dick said administrators were looking to conclude the sale process by June 2020.

For consumers it would be much better if the government steps in and buys Virgin rather than a private investor or god beware a total collapse of the airline.

Meanwhile Virgin Australia’s COVID-19 related website outlining change/cancellation details can be found here yet it still doesn’t line out that cash refunds are a thing of the past. Disingenuous at best, fraud at worst.

Conclusion

Since any refund of cash is officially off the table my prediction is that Virgin Australia will find it hard to ever find people again to give them upfront cash in these uncertain times. After all who would want to risk money disappearing again and the saying fool me once shame on you ; fool me twice shame on me ring true here.

For a relatively small airline Virgin Australia is just laden with debt and even with a restructuring I can’t see a way forward for an operation like this.

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