HomeAirlinesVirgin Australia Is Going Into Voluntary Administration

Virgin Australia Is Going Into Voluntary Administration

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Update 21 April 2020: Confirmed – Virgin Australia is now in voluntary administration

Following fruitless discussions with the Australian and regional governments regarding bailouts totaling AU$1.4 billion (~US$892 million), it looks like Virgin Australia is heading for voluntary administration if reports in Australia are to be believed. The airline’s board of directors met on Monday night (AEST) and, following discussions, it is believed that Deloitte is being called in to oversee the administration process.

Voluntary Administration

It’s important to note that a voluntary administration isn’t the same as a bankruptcy so this doesn’t necessarily signal the demise of Virgin Australia, but it does signal a significant set of issues at the airline and the need for a major restructuring of the business.

At the time of writing (approximately 21:30 AEST), there has been no official announcement from Virgin Australia or Deloitte but there’s no getting around the fact that the airline owes over AU$4.8 billion (~US$3.06 billion) and with its entire fleet essentially grounded that’s a debt that it has no way to service.

At this point in time, it’s unclear how Virgin Australia will exit the administration process but it’s very likely that current investors (which include Etihad and Singapore Airlines) will be wiped out as the airline is either sold (at next to no value) or that current creditors will agree a debt for equity deal and take control.

With the Australian government on the record as believing that the country needs a second airline (a Qantas monopoly would be terrible for consumers), it’s possible that it may be one of the parties best positioned to buy Virgin Australia out of administration with a view to selling it on at a later date but, at this early stage of proceedings, there’s no guarantee that this is even being discussed.

Refunds & Future Bookings

Until we start getting more information out of the airline and its presumed administrators we can only speculate as to the fate of anyone who is still waiting for a refund from Virgin Australia or anyone who still has future travel booked with the airline.

If I was owed money or future travel by the airline I probably wouldn’t be hanging around to see what everyone’s next move is – I’d be contacting my credit card company and requesting a chargeback as soon as possible. There’s no knowing when (if ever) Virgin Australia aircraft will take to the skies again and customers awaiting refunds will probably find themselves a long way down the list of creditors looking for a payout.

Bottom Line

This story is only just getting going so we’re only at the very early stages of a long and drawn-out process for Virgin Australia, its employees, and its customers so there are a lot of unanswered questions and a lot of unknowns right now…but I’ll post updates as and when meaningful information is released.

We know that Australia needs a second airline, what we don’t know is what that second airline will look like this time next year.

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