Virgin Australia in administration as govt rejects handout plea

Virgin Australia entered administration after the debt-heavy airline failed to secure a government bailout to save it from the impact of the coronavirus pandemic.

Australia’s second-biggest airline had been looking for a AUD$1.4bn (£700m) rescue from Canberra as the crisis forced carriers to ground fleets globally. Accountants Deloitte were appointed to look for new investors to recapitalise the business.

"The decision comes as the group has continued to seek financial assistance from a number of parties, including state and federal governments, to help it through the unprecedented crisis, however is yet to secure the required support," Virgin said in a statement.

Deloitte's Vaughan Strawbridge said there had been "several expressions of interests so far" from potential investors.

Australia is now just left with Qantas as its main airline, prompting concerns about the lack of competition in the industry. Despite agreeing to talks, the government had always been wary of giving a handout to Virgin given the financial muscle of its foreign owners.

The carrier, saddled with AUD$5bn in debt, is owned by Singapore Airlines, Etihad, HNA and China’s Nanshan Group with 20% each while Richard Branson’s Virgin Group holds 10%.

The government stood by its two-airline policy, and stressed "this is not Ansett", a reference to the carrier that went under in 2001.

"The government was not going to bail out five large foreign shareholders with deep pockets who, together, own 90% of this airline," said Australia's Treasurer Josh Frydenberg.

Virgin said it would still operate scheduled flights and retain existing management led by chief executive Paul Scurrah during the restructuring.

NO MAN IS AN ISLAND

In the UK, Branson offered to put his exclusive luxury Caribbean island of Necker up as collateral as he pressed the UK government for a loan to ease the pressure on his Virgin Atlantic operation.

British Finance Minister Rishi Sunak has balked at an industry-wide bailout, opting instead to look at companies on a case-by-case basis. In a letter to staff on Monday, Branson insisted he was looking for a loan and not a taxpayer handout.

"As with other Virgin assets, our team will raise as much money against the island as possible to save as many jobs as possible around the group," Branson said. Last month he offered to inject £250m into the Virgin Group, with most of that going to the airline.

Earlier this month, Rolls-Royce, Airbus, Heathrow airport and Manchester Airports Group sent letters to the government highlighting the importance of Virgin Atlantic to the UK's manufacturing supply chain.

However, critics of the billionaire noted that he had been exempt from UK income tax on his fortune having lived on the island for 14 years.

They also pointed out that the major US carrier Delta Airlines, itself a recipient of a $1.6bn low-interest loan from the American government last week, owned 49% of Virgin Atlantic.