Virgin Australia entered voluntary administration, endangering 16,000 jobs.
The airline will be managed by Deloitte accountants during its restructuring and its search for a buyer.
There are fears that the restructuring will lead to the removal of less profitable routes, particularly to regional areas, which means that Qantas will be the only supplier and will be able to drive up prices.
Virgin will continue to operate limited international and domestic flights during the administration, with executives hoping to exit the process “as soon as possible.”
Last night, the tearful staff held a press conference and asked the government for a bailout, saying, “We can’t collapse, we ask you to help Virgin.
Virgin Australia entered voluntary administration, endangering 16,000 jobs. Pictured: Brisbane Airport today
Virgin called the directors after a meeting of the board of directors of its international shareholders voted against granting additional financial support. Pictured: Brisbane staff today
The airline will be managed by Deloitte accountants during its restructuring and its search for a buyer. Pictured: staff in Brisbane on Tuesday
The carrier previously requested a $ 1.4 billion financial lifeline, which was rejected after the spread of the coronavirus hit its domestic and international flight operations.
Virgin called the directors after a meeting of the board of directors of its international shareholders voted against granting additional financial support.
A final plea to the government for a $ 100 million grant for short-term relief has also been rejected, the Australian reported on Tuesday.
Virgin has approximately $ 5 billion in debt, employs approximately 10,000 people and supports 6,000 other indirect jobs.
Virgin Australia employee Tony Smith (center) met with journalists at Melbourne airport on Monday as the company struggles to stay afloat.
Most full-time employees have already been temporarily laid off after the collapse of the airline and tourism markets across the country with the spread of the virus.
But the latest development, which should be announced on the stock market Tuesday morning, means that their future is uncertain unless Virgin can negotiate through the administration process and emerge on the other side.
The existing Virgin Australia management team is expected to remain in place during the administration period during which the focus will be on debt restructuring.
Private equity firms, including BGH Capital, have been known to bypass the stricken airline that sought help from NSW and the Queensland government.
In an open letter to staff around the world, Virgin Group founder Richard Branson said that Virgin Australia is fighting for life.
He said the airline and others in its group needed government assistance in the form of loans to weather “this catastrophic global crisis.”
“We hope Virgin Australia can become stronger than ever, as a more sustainable and financially viable airline,” he told staff.
“If Virgin Australia disappears, Qantas would effectively have the monopoly of the Australian sky. We all know what it could lead to.
Virgin is 90% owned by foreign interests, Singapore Airlines, Etihad Airways and the Chinese conglomerates HNA Group and Hanshan with 80%, and Richard Branson’s Virgin Group 10%.
National tourism operators are terrified that if Virgin Australia’s fleet is removed from the sky, a Qantas monopoly would raise air fares, killing their businesses
“They have very large shareholders with deep pockets,” treasurer Josh Frydenberg said on Monday.
But it seems that these shareholders will not come to the rescue, although the carrier may find new private equity buyers.
Aviation analysts have argued that the federal government must ensure that the aviation market remains competitive and that Virgin’s rival Qantas is not left behind.
Independent analyst Brendan Sobie of Sobie Aviation says maintaining competition is key to keeping flight prices low.
“The government could put something like a tariff cap,” he said.
The Australian airline market remains attractive over the long term, particularly in the domestic segment.
“That’s why you see all these investors waiting behind the scenes,” said Virgin, said Sobie.
Virgin Australia collapse will offer restructuring “opportunity”, says Mathias Cormann
Finance Minister Mathias Cormann has dismissed calls to the federal government to buy a stake in Virgin Australia.
Senator Cormann said the administration would offer a chance to restructure the underperforming parts of the business.
“It provides an opportunity for private sector interests to come forward and buy the business or help recapitalize the business,” he said.
“There are many opportunities from now on to ensure that there is a second viable airline in Australia. “
He said the primary responsibility was with the major shareholders, including Singapore Airlines, Etihad and Chinese investors.
National MP David Gillespie said the government made a mistake in refusing to give the airline the $ 1.4 billion loan.
“I am disappointed that we were unable to respond to their request for help,” he told The Australian.
“We had two major airlines involved in the coronavirus epidemic, but it looks like we will only have one on the other side.”