Virgin Australia collapses as pandemic wipes out global air travel

New York

VIRGIN Australia Holdings became Asia's first airline to fall to the coronavirus after the outbreak deprived the debt-burdened company of almost all income.

Administrators at Deloitte, who have taken control of the Brisbane-based carrier, aim to restructure the business and find new owners within months. More than 10 parties have expressed an interest, Deloitte said on Tuesday.

Virgin Australia joins FlyBe - the United Kingdom's biggest domestic airline before it collapsed last month - among the industry's corporate casualties of the virus. Airlines have been pummelled by domestic and international travel bans that forced them to seek government aid.

Virgin Australia, which has furloughed 80 per cent of its 10,000 workers, will continue to operate some flights for essential workers, freight and the repatriation of Australians. The airline's frequent flyer programme is a separate company and is not in administration.

Vaughan Strawbridge, one of four administrators at Deloitte, said the airline's fate should be clear in two to three months. He said he does not plan to change Virgin Australia's operations or fire any workers.

"Generally you get the best outcome where you sell it as a whole, so that is definitely the preferred approach," Mr Strawbridge told reporters on Tuesday. There were "a number of very sophisticated parties who have got the capability to be part of the restructure", he said.

The fate of Virgin Australia, which had more than A$5 billion (S$4.49 billion) in debt as of the end of 2019, hung in the balance after it stopped virtually all services because of the virus and its request for state help failed. The company had asked the government for a A$1.4 billion loan, convertible into equity, to see it through the crisis.

Instead, the government called on the airline's shareholders to step in. Virgin Australia's final plea for A$200 million in state aid was rebuffed on Monday, chief executive officer Paul Scurrah said on Tuesday.

Almost entirely owned by foreign airlines, Virgin Australia is a unique experiment in aviation. Singapore Airlines, Etihad Airways, HNA Group and Nanshan Group each own about 20 per cent of the company. Richard Branson's Virgin Group owns about 10 per cent.

Etihad said it was unable to provide additional funding to Virgin Australia as it had to deal with the virus' impact on its own business. A representative for Singapore Airlines said the company would not comment on its investment. HNA also declined to comment, while Nanshan was not immediately reachable.

In a letter to Virgin staff on Monday, the British billionaire said his airlines in the UK and Australia would not survive the crisis without state support. Mr Branson said he is doing everything possible to keep England-based Virgin Atlantic Airways afloat, but it needs a UK-backed loan to ride out the storm.

Virgin Australia's fight for survival triggered an ugly feud with its larger domestic rival. Qantas Airways argued Virgin should not be rewarded with a bailout, while Virgin accused Qantas of spreading false rumours about its ebbing cash position - allegations denied by Qantas.

A voluntary administrator is usually appointed by directors after they decide the company is insolvent or nearing insolvency. Virgin Australia had about A$1.1 billion in cash at the end of 2019. The airline is dominated by Qantas in essentially a two-player market in Australia and has not made an annual profit for seven years.

While governments in the US and across Europe have stepped in with support, or said they intend to, the Australian government baulked at potentially owning a stake in a money-losing domestic airline.

Nicholas Moore, a former CEO of Macquarie Group, will engage with the administrator on behalf of the Australian government to find a "market-led solution" to Virgin's crisis, Treasurer Josh Frydenberg said on Tuesday. BLOOMBERG