In an occurrence long anticipated by many but still a shock, Virgin Australia is preparing to go into voluntary administration as a result of unsustainable debt and insufficient cash flow in the face of COVID-19 – as well as the final nail in the coffin – failing to secure a much-needed bailout from the Commonwealth government.
As reported by The Age, the country’s number two airline has already enlisted the accounting expertise of Deloitte in the hopes of finding viable restructuring options. Deloitte will, of course, be running point on Virgin Australia’s entire administration process; which includes the search for a potential new owner.
Virgin Australia’s board will be meeting tonight to discuss the future of the company. Sources have indicated that it has been a “near impossible” feat for the executive team to accomplish anything apart from surrendering to administrators.
Should administration actually come to fruition, which seems almost completely certain, 10,000 employees will be axed (and an additional 6,000 jobs indirectly impacted). This would not, however, be a debt free collapse of the airline, with approximately $5 billion owed to various creditors.
As per The Age, private equity firms are currently “… sniffing around Virgin Australia…” looking to possibly buy the business out of administration – which would begin to clear existing debts and renegotiate aircraft leases. The company being “reborn” through a deed of company arrangement in administration is the airline’s only chance.