Virgin Australia entered voluntary administration on April 20, 2020. The company confirmed the news, stating it was forced to take the step after failing to secure financial aid from the Australian government or other sources amid the global COVID-19 crisis. If it fails to secure fresh funds, the airline risks running out of cash within six months, according to an American credit rating agency.
Vaughan Strawbridge, John Greig, Sal Algeri and Richard Hughes of Deloitte were appointed as voluntary administrators of the company and a number of its subsidiaries, excluding Velocity Frequent Flyer. While the latter company is also owned by Virgin Australia Holdings, it is a separate company and is not in administration, the group has highlighted in a statement released on April 20, 2020.
For the time being, Virgin Australia continues to operate a bare-minimum flight schedule, mainly serving government-subsidized domestic and international routes.
“Our intention is to undertake a process to restructure and re-finance the business and bring it out of administration as soon as possible,” administrator, Vaughan Strawbridge, is cited in the company’s statement as saying.
Virgin Australia Group employs approximately 10,000 people directly and further 6,000 indirectly. Prior to the coronavirus crisis, it flew to 41 destinations and contributed around $11 billion to the Australian economy annually, as highlighted by Chief Executive Officer Paul Scurrah.
On April 17, 2020, American credit rating agency Fitch Ratings downgraded Virgin Australia Holdings’ Long-Term Foreign-Currency Issuer Default Rating to ‘CCC-‘ from ‘B-‘.
While essentially agreeing that Virgin (VAH) took the right steps to preserve cash flows by grounding its domestic fleet, keeping only the government-subsidized minimum domestic network, Fitch also stated that without fresh funds the Australian airline would run out of liquidity over the next six months.