Virgin Australia in administration

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If you have been following the news, you will be aware Virgin Australia was placed into voluntary administration today. This is obviously of much interest to the avid traveller. It will also impact on the Velocity program, which is close to the heart of many.

In this post, I will be keeping a bit of a diary of the process. Basically giving links to some of the important information that may be of interest. I will try to update this post over the coming weeks as the situation evolves.

For now, the main change has been a suspension of redemptions in Velocity. The path of Velocity through this will be in another post.

In the meantime, Virgin will continue to operate the Minimal Network underwritten by the government. In addition, there are no immediate changes for the staff, Those stood down as a result of the downturn will remain on the books, and have access to JobKeeper.

The other main issue for customers affects those that have recently received Travel Credits as the result of cancellations. At present, these are still valid for use. However, given many aren’t in a position to travel at present, they may be of little immediate use.

24 May 2020

It’s a Sunday, and probably a day you wouldn’t expect much to be happening. But you’d be wrong.

The administrators may have been hesitant to reveal who was on the shortlist, but now Bain Capital have outed themselves. And they are planning to submit a bid in the second round in an effort to gain control of Virgin Australia.

Binding Bids are due by June 12, and Bain Capital is positioning itself as the ‘strongest’ suitor to turnaround the airline. While they do not reveal much about the business model they will use, they do want to bring back some of the ‘fun’ elements of Virgin Blue.

That doesn’t in itself mean returning to being a Low Cost Carrier – it leaves the door open to a number of possibilities.

There are some interesting days ahead of us!

18 May 2020

The first ‘indicative’ bids for Virgin Australia were due last Friday. Over the weekend, Deloitte whittled the bids down to a shortlist of 4. While they have not publically disclosed the shortlisted bidders, the media has generally reported the following:

  • BGH Capital (Private Equity Group)
  • Bain Capital
  • Indigo Partners (US Based Airline Investor)
  • Cyrus Capital Partners

The next deadline is June 12, when the shortlisted bidders are expected to submit their final bids for Virgin Australia.

Between now and June 12, the bidders will get to undertake further due diligence on the company, and refine their ideas of what a new version of Virgin may look like. And importantly, put together a proposal.

Whether all four of them make it to the end line remains to be seen. For those of us looking on as customers (and Velocity members), hopefully we will get a better picture of what is on the table late in June.

30 April 2020

Deloitte held the first creditor meeting on 30 April 2020. The meeting formalised the appointment of Deloitte as the administrator,

Perhaps of more interest to many were statements around the level of interest in the process. At the meeting, Deloittes confirmed that there were 20 parties that had expressed an interest in acquiring the business. This was made up of 8 parties that had signed a non-disclosure agreement and had access to the books of the company. Discussions were still proceeding with the other 12.

Who is in the (data) room?

We don’t officially know who is kicking tyres in this process. Having said that, there have been a number of media reports offering the following parties.

Of course, some of these may be more serious than others. In addition, some may be looking at the company as a matter of course. It is always possible that the final result may be some combination of the above. Or it may be someone else altogether.

21 April 2020

After days of speculation, Virgin Australia placed itself into voluntary administration. The ASX announcement is here.

As a company, Virgin Australia carried a lot of debt. Between the creditors, the total debt is over $5 Billion. Obviously a lot and the management team at Virgin has been addressing the issue.

Unfortunately, before the work was completed, the world was hit head-on by Covid-19. As a result of government actions in containing the outbreak, the travel industry has been hit, and hard.

Airlines were not immune to this, and as borders closed, the demand for the services dried up. As reported elsewhere, Virgin was down to just one flight a day at one point.

While Virgin Australia tried to find funds to survive, this was not to be. The Australian government declined to provide a loan. In addition, the main shareholders, each having their own issues through the pandemic, were in no real position to help out.

Given all that, the board opted for Voluntary Administration. The stated purpose of the administration is to “recapitalise the business and help ensure it emerges in a stronger financial position on the other side of the COVID-19 crisis”.

Thoughts

While a difficult situation, this may be the best path for Virgin. There may be some pain, but it should be able to find itself a new owner, and a new structure. Free of its onerous debt, and complicated ownership, it should be able to be a solid airline.

Hopefully, it will be not too dissimilar to the airline today. Maybe smaller, but I hope it doesn’t go downmarket but remains as a viable option to Qantas.

Anyway, time will tell, and over the coming few months, I will update this post with further information as the process progresses.

 

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About Author

Mark is the founder of FlyStayPoints, and caught the travel bug early in life. He discovered the benefits of travel loyalty programs in 2001, and is always learning how they can make travel better. While work takes him between Perth and Melbourne, he is always plotting his next adventure.