MIAMI – Virgin Australia (VA) would voluntarily go into administration if it does not receive government aid amid unprecedented fleet groundings and worker layoffs in the thousands.
Previously, VA CEO, Paul Scurrah urged Federal Government to help the country’s airlines stay afloat, asking for an AU$1.4bn loan to help Virgin ride out the COVID-19 crisis.
Like most airlines globally, Virgin is turning to its government and not reluctant shareholders. Virgin’s loan could be converted to equity, prompting Treasurer Josh Frydenberg to say, “We’re not in the business of owning an airline.”
Implied risks with VA’s lastest actions
Last week, the airline suspended all its domestic capacity with the exception of a return daily service between Sydney and Melbourne, a move which left aircraft on land and employees at home.
Currently, VA has 10,000 employees and is Australia’s second-largest carrier with 25 million passengers annually. Further, its situation would not only affect the country’s aviation industry but specifically its owner groups Singapore Airlines (SQ), Eithad (EY), Nanshan and HNA conglomerates.
By now, the carrier requested a trading halt as it continues to consider ongoing issues with respect to financial assistance and restructuring alternatives, said a VA spokesman.
Government support update
Today, Australian Deputy Prime Minister, Michael McCormack has responded saying that VA and Qantas (QF) would both be part of an AU$165m government aid package to keep flying at a minimum within the domestic network, according to a report by media 9News.
However, even though this bailout would support the company’s minimal domestic schedule by adding some of its withdrawn flights, cabin and ground crew, VA has been considering restructuring its debt to maintain its sustainability while jobs remain at risk amid a still present uncertainty.
According to a story written by Will Horton for Forbes, Qantas may publicly argue against government support to Virgin. Qantas’ growth strategy has made Australia’s competition regulator investigate if the carrier has breached competition laws by downplaying competitors and spreading misinformation.
Horton notes that Australia will not tolerate Qantas having a monopoly on aviation if Virgin Australia goes out of business. “Qantas wants to limit the amount of government support, ensuring Virgin remains but does not flourish,” he notes.
Qantas understood from the get-go that Virgin’s business was not growing, so it spearheaded a growth strategy in the form of “domestic performance, international rejuvenation, and a lucrative loyalty program.”
In light of this, Treasurer Frydenberg told Channel 9 that Australia would not tolerate Qantas having a monopoly on aviation if Virgin Australia goes out of business, advocating having two airlines in the domestic market.
As governments around the world are beginning to step up to support their local commercial aviation industries, even amid some internal competition, there seems to be a silver lining visible for airlines, airports and the millions of aviation workers facing the current industry crisis.
Stay tuned to Airways for the latest developments on the global commercial aviation industry’s fight against and subsequent recovery from the fallout of the ongoing COVID-19 crisis.