Virgin Australia 737
Let's cut to the chase. Some links on this site pay us referral fees for sending business and sales. We value your time and money and won't waste it. For our complete advertising policy, click here. The content on this page is not provided by any companies mentioned, and has not been reviewed, approved or otherwise endorsed by these entities. Opinions expressed here are the author's alone.

Virgin Australia has been on life support since the global outbreak of covid-19, and one of the lifelines just got unplugged. No deal was reached between PM Scott Morrison and the Australian Govt, and as a result the airline has immediately entered voluntary administration.

That doesn’t mean it’s over for Virgin Australia by any means, but it’s a scary precedent in the relations between governments and airlines and the havoc the pandemic will wreak on airlines globally…

Virgin Australia Voluntary Administration

“No deal” is the essence of the story. Virgin Australia was seeking $1.8 billion AUD to shore up immediate concerns, but that makes up less than half the airlines overall $5 billion AUD debt, and the Australian Government said no.

PM Scott Morrison and the Australian Government has been wary of bailing out Virgin Australia, despite the virtual monopoly it would create for Qantas on domestic routes and has stood its ground despite the worsening global situation, which may prove to make life untenable for all airlines.

Just days ago, a drama filled plot emerged with a supposed sweetheart deal between Qantas and the Government, where Qantas was supposedly chosen to receive state aid to maintain flight routes, before Virgin Australia insisted on joining.

Is a “no” retribution for thwarted plans, or is it just a no because of Virgin Australia’s largely foreign ownership? Either way, it’s not the end of the road for Virgin Australia, or those holding Velocity Points, yet – but it’s dire times.

Voluntary administration is simply the directors of a company looking for ways out, and assessing if one exists. It’s a lengthy process, but one where the airline could emerge in tact, in parts, or simply as a loyalty program without an airline.

Yes, even if the airline folds, your Velocity points may be worth less, but not worthless.

During this time, an outside entity is brought in to do some serious accounting work and then in turn make proposals to satisfy, or mortify current shareholders. It could involve anything from selling off part of the business, like the Velocity loyalty program to an outside group, or simply taking a haircut, selling a portion of the business to outsiders on the cheap and so forth.

It’s not the end for Virgin Australia, but the airline is in serious trouble.

The good news is that a near death often raises the alarm for previously unresponsive governments. Queensland, where Virgin Australia is headquartered, had already offered $200 million AUD to keep the headquarters in the region, which then attracted a competing bid from New South Wales.

This voluntary administration Virgin Australia has entered gives the entity greater flexibility to negotiate finances with the government once again, while potentially attracting new investors. For the sake of airline competition and innovation, it’s hard not to hope a solution is found. Plus, all the jobs…

Gilbert Ott

Gilbert Ott is an ever curious traveler and one of the world's leading travel experts. His adventures take him all over the globe, often spanning over 200,000 miles a year and his travel exploits are regularly...

Join the Conversation

5 Comments

  1. Now I see why folks with Velocity points were transferring them to KrisFlyer earlier back in March. I really hope VA makes it through this.

  2. Thought are with the staff impacted…
    I don’t know the detail of Virgin Australia’s ownership but if as Virgin Atlantic, it’s a shame Mr Branson didn’t do more from his tax exile island…

  3. Virgin is 9% Australian 91% Asian and China, why should tax payer bail out a overseas company with 5 BILLION DEBT already. Wake up Australia you are been sold out .

  4. So if we are left with one main airline we will be screwed up the jacket with price gouging for sure.

Leave a comment

Your email address will not be published.