Virgin Australia hires Deloitte for voluntary administration

Australia’s second largest airline Virgin Atlantic has appointed Deloitte to oversee its voluntary administration, having been effectively grounded by the coronavirus. Virgin Atlantic had recently been rebuffed by Australia’s Federal Government regarding a request for a bailout.

After a period of relative stability, the now infamous collapse of UK-based Monarch commenced a two-year nose-dive for the aviation sector. 15 airlines failed in 2018, and the crisis deepened over 2019, with the likes of Flymbi and Thomas Cook folding, seeing 33 carriers fail over the course of the year. That was all before the situation was dramatically exacerbated by the onset of the coronavirus.

Now, as the world continues to battle the deadly pandemic with an international suspension of non-essential travel, many airliners are rapidly approaching breaking point. The Covid-19 lock-down was cited by UK airline Flybe as a factor in its collapse earlier in the year, and in a bid to avoid following suit while their planes are grounded, firms from EasyJet to British Airways to Norwegian and Virgin have taken drastic measures to stay afloat.

Controversially, the private industry has also gone cap-in-hand to several governments for public aid. Among these pleas, the one which seems to have drawn most public ire comes from famous billionaire Richard Branson.

The founder of the Virgin Group is currently weathering the Covid-19 crisis on a private island in the Caribbean, but despite his enormous personal wealth, the tycoon has made multiple attempts to convince the UK government to give his Virgin Atlantic airline a £500 million hand-out, to help it survive the coronavirus pandemic and the economic fallout of the lock-down.

Now, at this side side of the world, Virgin Australia, which is 10% owned by the billionaire’s Virgin Group, has gone into administration, after similar requests for a £700 million bailout from the Australian Government fell on deaf ears.

As reported by the Guardian, Virgin Australia was also turned down by Australia’s Government for an emergency loan of $1.4 billion, and was recently among a number of airlines to have recently announced it was cutting its consulting spend to help it survive the crisis. Ultimately, none of this seems to have been enough to stop it falling out of the skies.

As a result, Virgin Australia has become the biggest airline to collapse in the nation since 2002. Virgin Australia employs 10,000 people whose employment is now in jeopardy, while the future of the company’s fleet of roughly 130 planes is uncertain. The fleet is reportedly heavily mortgaged already, and of the $4.8 billion the airline owes to its banks, $540 million needs to be repaid or refinanced by the end of this calendar year. Meanwhile the administrators must also deal with around $1.2 billion’s worth of customer ticket bookings.

Restructuring experts from Deloitte have been hired to lead the process. John Greig, Vaughan Strawbridge and Richard Hughes of Big Four firm will act as joint administrators.