Virgin Australia has entered voluntary administration and frozen its Velocity program for four weeks as suitors begin to circle the battered airline.
Big Four accounting firm Deloitte was unveiled as the voluntary administrator of the nation’s number two carrier on Tuesday and will now comb through its books to identify potential asset sales to pay down debt, or an outright sale of the carrier to another party.
Deloitte said as many as 10 parties were interested in buying the debt-laden firm and that a sale process would likely be wrapped up within “a matter of months”.
It is unclear what will happen to Virgin’s 10,000 staff but chief executive Paul Scurrah said the company was focused on “preserving as many jobs as we can”.
Deloitte told Virgin staff on Tuesday there were no plans for redundancies or changes to their employment.
The restructuring specialist said its aim was to help Virgin emerge “in a stronger position on the other side of the COVID-19 crisis” .
The shape, size and function of Virgin would depend on what the eventual buyers want, Deloitte said.
Velocity Frequent Flyer business will be offered to buyers as part of the sale.
Velocity, while owned by the group, is a separate company managed by a trust and is not in administration.
Millions of dollars worth of Velocity rewards are currently in limbo but customers have been assured frequent flyer points and customer credit for cancelled flights will be protected during the airline’s sale process.
Velocity In a statement on its website told members their points “aren’t going anywhere”.
Members reportedly crashed the Velocity website on Monday night.
Customers will no doubt be hoping to avoid a repeat of 2001, when an estimated $700 million worth of Ansett Australia global rewards points were rendered worthless when the airline collapsed.
Virgin’s management team will assist voluntary administrators Vaughan Strawbridge, John Greig, Sal Algeri and Richard Hughes as the airline continues to operate a skeleton flight schedule for essential workers, freight corridors, and returning Australians home.
Mr Strawbridge said he will call for expressions of interest during the next three weeks.
“This is a matter of months – not longer than that,” Mr Strawbridge said.
Tuesday’s decision comes as Virgin continues to seek financial assistance from a number of parties, including state and federal governments, to help it through the coronavirus crisis, however it is yet to secure the required support.
The federal government again rejected buying a stake in the struggling airline, which has cut services, stood down staff, and suspended trading on the ASX amid widening coronavirus travel bans.
Up to 16,000 jobs are at risk, with the federal government resisting the company’s plea for a $1.4 billion bailout loan.
Labor wants Prime Minister Scott Morrison to save Virgin through extending or guaranteeing lines of credit and taking an equity stake.
Former Macquarie Bank chief executive Nicholas Moore has been appointed as the federal government’s representative to work with administrators.
Virgin Australia is 90 per cent foreign-owned, with Singapore Airlines, Etihad Airways and Chinese conglomerates HNA Group and Hanshan owning 80 per cent between them, while Richard Branson’s Virgin Group still owns 10 per cent.
The company – which is carrying about $5 billion in debt after several years of financial losses – has been decimated by the coronavirus pandemic as demand for travel evaporated during increasingly severe quarantine measures.
Its ASX-listed shares have lost 43.67 per cent of their value in 2020 and hit an all-time low of 5.0 cents on March 12 and 13.
It suspended trading on the ASX on April 14 at 8.6 cents per share.
Last month Virgin stood down about 8,000 of its 10,000 workers until at least the end of May, shut down budget subsidiary Tigerair indefinitely, and further slashed domestic flight capacity in the wake of the coronavirus border restrictions.
Virgin announced a restructure at its August 2019 full-year result where it lost $349.1 million, leaving it in the red for the seventh year in a row.
Originally published as Virgin in administration, freezes Velocity