Virgin Australia (VA), the second largest airline in Australia, is currently strapped for cash owing to the COVID-19 pandemic. As a result, it entered into a trade halt effective Tuesday, until announced by the airline or for two business days, whichever comes earlier. The airline is in the midst of a discussion about financial assistance by the Australian Government and restructuring of the company.
Initially, it was believed that Virgin Australia would have been bailed out by its main shareholders, namely, Singapore Airlines, Etihad Airways and the HNA Group from China. However, this is not the case. Singapore Airlines is currently focused on its financial health and both the HNA Group and Etihad have refused to comment on Virgin’s funding.
To help weather the COVID-19 storm, Virgin Australia has hired debt expert Jim McKnight of American Investment Bank Houlihan Lokey. The airline is also considering the option of going into administration where it will be handed over to administration experts, who in fact can take decisions the board of directors cannot and have powers not available to the board.
Administrators may be able to take a haircut from many creditors under a deed of company arrangement and may also free the company from uneconomically viable contracts, significantly improving the financial situation of the company.
Meanwhile, Virgin Australia has requested the Australian Government for financial assistance of up to A$1.4 billion as part of the broader A$5 billion airline bailout package. The airline is also considering the option of converting this loan into equity for the government. As the carrier cuts back operations, the government is still evaluating its package.
The airline has stopped all operations except for a six weekly service between Melbourne and Sydney and a few cargo flights. The airline has also said that it are open to flying charter flights if the Government were to require such a service.