Virgin Australia has gone into voluntary administration after crisis talks with both the NSW and Queensland governments failed
https://www.abc.net.au/news/2020-04-21/virgin-australia-goes…
Will we end up with lack of competition and very overpriced Qantas/Jetstar flights for domestic flights?
To late.
Doh!
Yeah, seems the redemption page can't be accessed and people are trying to sell them on the classified page.
From Virgin's ASX release:
"Velocity Frequent Flyer, while owned by the Group, is a separate company and is not in administration."
sounds like damage country to prevent mass panic
Qantas FF is profitable in its own right. Virgin's might be as well, it could be in their best interests to keep it running so they can flog it off later to pay off some of that debt.
Velocity was their most profitable business. Was valued at about $2b as at last year.
damage control*
Virgin has a $5billion debt.. has this amassed in the last 2 months since COVID-19 or was this already a failing company? (rhetorical)
If the government bails them out $1.4billion, will they just end up like Holden? (except at least Holden was still(ish) selling cars, where giving Virgin money will just go to the staff/rich managers as flights are still grounded). $1.4billion/16000 workers = $87500pa.
Edit: Also, this sounds more like a political ploy by Anthony Albanese (Labour) and comes across very 'Think of all the children' (16,000 workers on JobSeeker). They had a young man saying Virgin is like his mother.. man, I hate politics..
Interestingly Virgin Atlantic is also begging for money from the UK government. Plus other airlines around the world doing the same from their local governments.
It would be foolish to pump money into an airline before weknow what the market for flying will be after the pandemic. While we may be free other nations wont be for a long period of time.
Virgin says it needs $200m to survive for 2 weeks. If you play the Labor card of protecting jobs, thats 14K per employee for 2 weeks.
Given the salaries of say average of 100K per employee pa that should be $4K each. ($60mil) the other $140 million goes to paying off debt/interest etc.
So if its for the employees why not pay them direct and give them 6 weeks of salary.
And that assumes the money given by the government would pay all 15000 employees. With flights dramatically reduced even 20% to be put back on would be optimistic, so $200 mil for 3000 employees for 2 weeks is a pretty high price to pay.
And what about the transport workers union stumping up money from union funds?
No because they are wisely realising its not good use of the money.
Lets keep the bullets for the real war, when we know where the best deployment of money will be.
Virgin says it needs $200m to survive for 2 weeks.
What difference will 2 weeks make. They need to survive the next 52 weeks => $5.2 billion at that rate.
The Chris Crocker act was priceless.
$1.4billion/16000 workers = $87500pa.
Yeah I don't think the bailout would be spent that way. There are other costs in operating an airline than just staff salaries.
I took their main point to be that 16,000 jobs will be lost and will be on Centrelink. So, if $1.4b was spent on the workers rather than other costs of operating an airline, they could actually pay the workers a whole year for the same amount (albeit a possible pay cut).
Obviously, there's more to it than just the workers (as other industries may benefit with Virgin in action if Qantas didn't pick up the 'slack'), but I simplified things showing stating how much $1.4b over 16,000 workers actually was. Even with the bailout, there is no guarantee Virgin would still be running in 12 months time.
Edit: And to be fair, we've just been 'burnt' by Holden - why throw money at a dying company for them just to 'survive' a little longer? If Virgin was making money every year and it was a sound investment, then it'd be treated differently. Too many alarm bells here (running at a loss, foreign owned, industry uncertain, Qantas still here, etc)
Whose main point? OPs?
Their staff has been stood down, I seriously doubt they'd be paid their full salaries via the bailout if there was one (not sure how I feel about bailing them out either).
I'm not sure if you can compare this with Holden simply because the car industry here isn't mostly reliant on two main players. Virgin dying can mean Qantas could monopolise the industry resulting in very bad news for all flyers.
Saw your edit, I do agree that there are too many alarm bells. Virgin seems to be mismanaged to a disgusting degree — and by an ex-Qantas exec too.
@Ghost47: Sorry, I meant Labour's press conference earlier (and OP's subject line of "Virgin Australia Has Gone into Voluntary Administration after Crisis Talks with Both The NSW and Queensland Governments Failed")
Monopolies are bad, but all flights will be expensive for the near future even if there is competition. It's going to be a while before the skies are full again.
Don't bail like Holden they will just shut it and take the money. The b@$t@=%s
They had a young man saying Virgin is like his mother..
Was his name Jesus?
man, I hate politics.
You're the one that injected politics into a discussion about.a financial issue. What a load of tripe.
Virgin has a $5billion debt.. has this amassed in the last 2 months since COVID-19 or was this already a failing company? (rhetorical)
Rhetorical or no, it's a question that needs answering. That $5bn is not actually debt, it's liabilities. Slight difference. That means things like leases, wages owed, loan repayments, airport terminal leases, and bond issues. A good chunk of those are actually bond issues - VAH raised about a billion dollars recently in a bond issue to seize full control of Velocity FF. It's possible in a deed of company arrangement they could wipe out bondholders (bonds aren't zero risk, they're low risk) and possibly make lenders take a haircut. If they can manage that, it's possible they could return to solvency sooner rather than later, but it will still need some capital to cover current liabilities like wages, super, tax, airport and aircraft leases.
Branson seems very happy to be a capitalist in times of plenty/price gouging, not so much when it comes to paying his taxes or suing cash strapped health services for 'unfair' contracts.
All Australia really needs is for Amazon Google and Facebook (and the other big players shifting tax liabilities around) to pay the taxes on the money they earn here, and not ship their 'intellectual IP' offshore for a marginal tax rate to a tax haven.
I wonder if governments doing it tough would have had any traction from Branson and his ilk if they went and asked for handouts? 'No, but we'll buy your essential services and then charge you a fortune to use them" would be the response.
Could Virgin not sell its assets off to pay itse debts, you know, like people have to? (I know, I'm totally naive!)
OR, Branson "I am VIRGIN", net worth $6.8 Billion. Debt $5 Billion. Pay off debt, Branson still a Billionaire? Just seems odd that during times of plenty Billionaires are happy to sit on mountains of money like Dragons, but in times of hardship they don't want to share in the pain?
branson pro brexit so exit another virgin seems fitting. I'm sure Obama will help him out…
Branson isn't siting on billions of dollars. For a start, most of his net worth is literally the Virgin Group companies. He's taken a massive drop on that already. A lot of the rest of his money is in illiquid assets he can't easily sell. He's already actually said he's willing to chip in to help some Virgin companies by offering some of his own assets as collateral on loans, such as his private island - but even still there are over 180 Virgin companies.
Most of Virgin Australia's assets are leasehold too. They don't really own planes (the most expensive asset).
No the government should not prop up a foreign owned business.
Hopefully after the shareholders and bondholders take a big haircut, VA will come out of this without the crushing debt on their balance sheet.
Good lord, this is a painful read from you lot.
First of all, the Virgin Airlines group entered voluntary administration, not liquidation. It is not closing down or stopping operations. It will largely be business as usual until Deloitte take the knife to the fat - burdensome leases, unprofitable routes, any rightsizing Virgin Aus already had planned etc. Virgin credit cards and everything else are unaffected, as is the Velocity Rewards program - all different entities not included in this.
Virgin Australia will be sold and it will be sold to a foreign buyer, likely a PE firm hand in hand with an airline. The government should have stepped in to save Virgin before and avoided all of this, though now is possibly an even better time to step in and help.
While you all keep referring to hand outs and bail outs, it's been widely reported that Virgin Australia were seeking convertible debt on very commercial terms. There is little reason to not pursue that aside from some rubbish games relating to PR Scomo was playing. There are so many Australian stakeholders that a handful of foreign owners is a moot point in the grand scheme.
I did read a comment about Deloitte being the only winner. This is a partial truth. Deloitte will rake in fees just like the voluntary administrator of Ansett did. Investment banks advising will also rake in fees. But Virgin is most likely to come out of this on the other side lean and profitable so consumers and staff can benefit - the quality of service, routes available, and any offshoring of jobs are the big questions.
"While you all keep referring to hand outs and bail outs, it's been widely reported that Virgin Australia were seeking convertible debt on very commercial terms"
Which is essentially the Federal Government taking an equity position in a Commercial Airline (with a 2 decade history of never making a profit), as there is no way that loan was ever going to be repaid on the current structure/financial position. It IS effectively a bailout since none else in the world would accept the terms being presented, their debt levels are staggering (6.5x)
I'll concede that this argument does have some strength to it - hyperbole and exaggeration aside as the business made a profit in 2012, and in many years prior to that. Although I am partial to the idea of a nationalised airline I can understand it's not what the current government is all about.
All I can really say is that the Government could have come to the table and negotiated in good faith with Virgin and the other creditors, restructuring the debts and benefiting all parties without the need for the distress and lost brand value and high consultant/advisor fees calling in administrators will cause. Again, at the end of the day we are all stakeholders in this, so to gamble on it in the way Scomo appears to have done wouldn't appear smart.
no way scomo's America first outlook was gonna help Virgin because he has no interest in oz.
Good lord, this is a painful read from you lot.
Member since 32min, and pushing who's line, with simple statements like
But Virgin is most likely to come out of this on the other side lean and profitable so consumers and staff can benefit
As nice words, but how can that be when we are all looking at many businesses that will struggle after this.
And what skills does Virgin have that most airlines, around the world, that are begging for government funding don't have. Airlines that were profitable before the Covid Crisis.
Will be interesting to see how long you stay around for, just like Virgin.
Richard Branson is planning to hock his island to save Virgin Atlantic, whereas he isnt going to put anything behind Virgin Australia.
Apparently you still don't understand the purpose and function of a voluntary administration. Perhaps if you read my comment and understood the 'simple statements' which were worded appropriately for the target audience you wouldn't need to ask how Virgin Australia is different to the struggling businesses. Indeed you shouldn't need to read my comment to understand how an airline is different to the other businesses in Australia, it is more so common sense.
If you were to look at Virgin Australia's financials you would see that the core business is a strong one and profitable, but it is burdened by a lot of debt and one off restructuring costs. Airlines profit by economies of scale, and in order to scale up quickly, debt must be taken on board, you see. Were this health and economic crisis not to have struck, Virgin Australia would have carried on implementing Scurrah's restructuring plan and been profitable within 24-months. Instead it is in administration. A lot of the debt and inefficiencies will be wiped out by the incoming purchaser which is what will set Virgin apart from all of those businesses and other airlines which you see fit to use as comparators. This is what you have apparently missed in my comment.
Without the debt stack in its current form, and without duplication of roles and resources, Virgin will work. Further to this point, Scomo and Frydenberg have stated that they will assist a restructured Virgin. In fact they are already helping our airlines. The QLD state government too, is likely to lend a helping hand. Can you now see how Virgin Australia is different?
If you took more than a cursory glance at headlines, and read the open letter, you would see Branson is offering up Necker Island as collateral to assist the Virgin Group as a whole, not just Virgin Atlantic.
Anything else, champ?
You are arguing for the same, if its going to be profitable after VA then it doesnt need govt money.
All VA's intend to do the same. Wipe out debt move forward. Nothing new with that.
We have no idea what the world is going to look like after the lockdowns finish (Not just ours). So pumping funds into ANY airline involves risk just like it does for many other business especially those dependednt upon tourism.
I doubt (or at least hope so), if many governments would pump taxpayers funds into a cruise line company at the moment.
@RockyRaccoon: Crazily, cruise bookings have improved since covid. 2021 is more heavily booked than 2019. It makes no sense at all.
@muncan: https://nypost.com/2020/04/01/cruise-bookings-are-on-the-ris…
"
Analysts at UBS say booking volume for 2021 cruises has “gone up 9 percent in the last 30 days versus the same time last year,” despite many cruise ships currently quarantined amid the coronavirus pandemic.
“That includes people applying their future cruise credits from sailings that were cancelled this year, but still shows a surprising resilience in desire to book a cruise,” UBS equity analysts wrote in a March 31 report on cruise lines.
"
I thought they would be selling the ships for scrap iron. Share prices have dived, but based on bookings, CCL is probably a better investment than Virgin right now. American Cruise ships are probably safer than NY City, too.
If the government is going to get involved, I prefer this approach: https://www.michaelwest.com.au/virgin-australia-buy-the-busi…
I don't see why our govt should be just bailing out a company that is less than 10% Australian owned. If the governments of Abu Dhabi and Singapore that actually own a large chunk of it aren't bailing it out with their taxpayer dollars, why should our government?
Singapore Airlines has come out already and said they have their own issues. UAE is in the toilet and looking to anything in the Middle East that is reliant on oil for economy is a waste of time.
I agree the plan to have the Govt buy the airline on the cheap is an option, especially for guaranteeing regional routes, which private equity firms are likely to cull. After Qantas' behaviour with Rex, it would leave Qantas as a monopoly to much of the interior, gouging our rural and regional centres.
If Qantas played the monopoly card to the full extent, it would then open skies to a competitor realising money is to be made. Then Qantas tries the drop prices game after they do, this gives the ACCC plenty of ammunition to go on.
So while no denying fares might rise, is that a bad thing? of course depends on how much. 10% or 100% (on average).
And should taxpayer money be used to reduce fares for consumers? Why not let the market work it out Its going to be many years for the market to settle back to a normal pattern.
Not saying that anything is optimal, but its too early to make very large financial decisions without much understanding of all the possibilities, and we dont know where things will settle after the crisis
The issue is, the market doesn't work it out in regional areas. For a long time, airlines like Rex (and others, there are many small airlines), fly regional routes at low capacity. Because they're using smaller aircraft and the frequency is different for them, they can turn a profit (albeit, not a large one).
Qantas comes into larger routes, Kangaroo Island is a very recent example, and floods the route with seats where the existing carriers were only operating at 60%(ish) capacity. Airfares were already high (Adelaide to KI one way was well over $200). This saw airlines such as Rex (and others) needing to collapse those routes which had been profitable for them as their capacity dwindled from 60% to say, 20-30%.
As Qantas has the cash reserves to ride out such behaviour, they can weather low capacity on a route for a period until competition is gone. Then, airfares start to resemble what we see in other places such as outback WA or QLD - $600-1000 one way. No overseas competition is going to come and pick up a route from say, Longreach to Brisbane.
Having airlines such as Rex and Virgin flying to larger regional centres (such as Mildura, Port Lincoln, Wagga etc), provides competition with balanced capacity. Qantas and Virgin don't need to fly to every out of the way place (in fact, we don't want them to), but we do need more than one airline flying.
Lest we all end up paying ADL > MEL $3-400 one way fares.
The issue is, the market doesn't work it out in regional areas. For a long time, airlines like Rex (and others, there are many small airlines), fly regional routes at low capacity. Because they're using smaller aircraft and the frequency is different for them, they can turn a profit (albeit, not a large one).
It's also heavily subsidised by state governments.
Corporations want Socialism when making a loss for shareholders, but demand Capitalism when making too much money. Would a corporation voluntarily give surplus money to the government in profitable times, to act not in the benefit of shareholders?
If the government bought a significant holding in VA (ie it became a partly publicly owned company) i wouldnt have an issue with it - we are constantly selling assets this actually might be a good time to claw a ascent back a Australian owned airline… - i do have an issue with them just wanting a handout
ON another note
Anyone in the same position as me they have flights booked with tigar/VA refunded with what i assume would be dud credit if it goes under? is there anything you can do? or am i just out ~550 on flights?
Exactly, you’re absolutely correct. We should be getting something back and own a share of the company. Otherwise it’s a bailout/handout where the Australian public gets nothing but the owners get richer. And the owners are already super wealthy.
If the company collapses and your airline credit becomes useless, I would do a credit card charge back.
partly agree, except Virgin would be an awful asset to own a share in, it has been hemorrhaging money for years with ever increasing debt. You would also have conflicting interests with the foreign companies and government that controls significant portion of it.
perhaps the government could buy the assets in a fire sale and start up a domestic carrier, but I doubt they could run it any better.
I'm not saying i would buy shares in Virgin but it could be used for social services especially for rural and country flights government own agencies are made to give back to the people and an airline could be great for Australians (not to mention the jobs it would provide/save)
I agree it would lose money but i would much rather the government take ownership then just give them money like the did with GM and Ford - i would also they stay in Australia then let that creep Allen Joyce have a monopoly over domestic travel
I think I would prefer a carrier like Air New Zealand being permitted to compete domestically or support for other small operators to operate those routes (perhaps with guarentees for minimum capacity to ensure they are viable). Really hate the idea of the government running something like this, it would never be competitive and just be a huge money sync without the needed market flexibility to innovate.
"overpriced Qantas/Jetstar flights"
Maybe if Virgin were making some money on their flights then they'd have lasted longer before going under or could have survived this?
90% foreign owned, I'm glad we're not bailing them out (giving money to the foreign owners) and assuming the rest of the risk and losses like what Air NZ did with Ansett kinda (well the huge losses part).
Blew my 130k points on a watch last week as the JB gift cards were all sold out by then. Got the order confirmation email and points still deducted from my account but not holding my breath they honor it now…hopefully I'm wrong!
Need the likes of EasyJet or Ryan Air to be invited in and assisted to takeover and re-brand Virgin?. Would then encourage Euro tourists to visit Australia (minus Covid19) and keep a second airline in business in order to continue competition for the locals! ….. keep Qantas honest, and not gouge us!.
You don't want another budget airline to come in for a race to the bottom. I know that they keep saying how Virgin should've stuck with the Virgin Blue model, but as a semi-frequent traveler, I loved having a slightly cheaper alternative to Qantas.
Comment from EY there appears to be many interested buyers. Doesn't equate to a successful buyer though lol.
Qantas might have monopoly in short term, it is likely another competitor enter Australian market provided if it is a profitable market.
If we already received a giftcard from redemptions, are we at risk of them being cancelled if we don't use them quickly enough?
Honestly I think gift cards should be fine, I'd be more worried about the gift card merchant (where the gift card can be redeemed) going bust.
I redeemed my points on a Super Cheap Auto gift card. The economy would have to be abysmal with no one driving anymore for SCA to go bust. Redeeming on cards to various fashion outlets could well be burning points. People can always downgrade to cheaper clothes, but they're not going to give up on car maintenance if they know what's good for them.
but they're not going to give up on car maintenance if they know what's good for them.
Hardly anyone buys stuff from Super Cheap Auto. I've had a car 20 years and been in that store twice and bought something once in that time.
Gamble and buy points cheap, hope for the best? Lol
So China might buy it but not sure Scomo will allow.
Heh. TBH sounds like a great tactic by China to buy up stuff during pandemic.
More and more stuff owned by communist
Chinese firms already own 40% of Virgin.
They likely stand to lose billions in lost debt.
Your logic Is flawed.
They might as well own 100% rather.
And why is the communist label still on people's mind in this age? Their people do not even get a handout during the lockdown unlike the so called non communist countries.
China is communist in the same way that the Nazis were socialist. They aren't. They weren't.
……good bye my 13K point……
no one can save her??
Oh my god! I know someone has 800k points with V and he is currently working away. He won’t like the news when he see it
I know someone who I work with who was stubborn to transfer his 800k to Singapore when he had the chance. A fool and his points are soon parted.
Velocity program is a seperate company owned by VA, it's something they'll sell off if shit goes up (ie your points are likely safe)
Can anyone deny Pauline's points about Virgin Australia?
Virgin hasn't made a profit in the last 7 years, so they paid no tax. It could be that the owners were loading Virgin with dodgy 'brand fees' and other charges to book losses, but the airline has now collapsed leaving the foreign entities holding the bag anyway.
Although it's sad to see Virgin wither and possibly die, I think the government made the right decision not to bail it out. In a few years Virgin would come back asking for billions more (we're too big to fail!). The airline has been losing money hand over fist.
From what I've read Paul Scurrah could have turned the company around, first thing he did when he joined was restructure and make people redundant. It seems it was run into the ground the past several years due to John Borghetti making silly business decisions.
Would also like to see the stats on how many free flights VA gave to Etihad and other shareholders under agreements…
Etihad barely has domestic flights so can't really give much back
They want a handout like everyone else, they have chinese investment so they are being treated differently. Nothing new, no other reason, we're giving money away but not to the chinese. America FIRST, last and always.
Joan and I did not leave Britain for tax reasons but for our love of the beautiful British Virgin Islands and, in particular, Necker Island.
How stupid does he think we are? 🤨
The government has made the right decision. Madness to "bail out" a nearly entirely foreign owned company with foreign exposure. I daresay there will be a fair bit of debt rising from holding entity loans to encumber the local entity to reduce tax.
Save the hundreds of millions and spend a fraction of this to fund a package for the workers if the worst happens.
I daresay a buyer will swing in and scoop up the best parts of Virgin for a song.
Likely one of their shareholder airlines lol
Maybe. Problem for them is Virgin is asset poor.
All these companies have taken people granted for years. I find it hard to feel bad for them.
Im deadset against the bailout, but i wonder what impact freight haulage will have with one less carrier ?
Prepare to pay more for everything if Virgin doesn't rise again to where it is now. Someone on some route be it freight or passenger will pay more for a Qantas flight.
Consumers will lose, and we will never see another Virgin deal on OzBargain.
Get ready for $600 flights one way to Sydney from Melbourne
In all honesty I think we were headed for expensive time for flights whether they failed or not. After this period both airlines not going to be rushing out to do big sales and promos. They’ll be trimming the fat, minimising routes that don’t fill every seat, and keeping the prices high. There’s a time for sales and loss-leading but it ain’t now.
I don't think this prediction is overly accurate, ignores the fact of how low their asset utilisation would be then. Airlines can't afford low asset utilisation (which is why many are failing currently).
They'll retire some planes and slow down on some routes as a result, but I dont see that decrease being greater than the drop in demand.
Also fuel prices will be dirt cheap for a while, so that'll get us through a year or two of cheap tickets!
till insurers include covid where u gonna go?
Well exactly, explaining the lower demand.
I'm more interested in how it all works now, can their big airline shareholders bid on their assets?
Seems like quite the opportunity if they can… Nose dive the company during a pandemic when the assets can't really be sold anywhere else, then snap them up real cheap.
I doubt we won't see a replacement airline - the assets need to go somewhere.
i still have $700 worth of Virgin Flight Voucher that I got from my cancelled NZ trip… Hope they survive…
Virgin was one of the worst airlines I every experienced.
Was treated rudely by staff for absolutely no reason.
Never flew with them again.
I've got 90k of velocity points, anyone know how I can quickly cash them out??
many thanks.