Virgin Australia has gone into voluntary administration after the country’s Government again ruled out saving the airline, putting 16,000 jobs at risk.
Having been forced to cancel almost all its flights during the coronavirus outbreak, the airline suspended trading in its shares on the Australian stock exchange last week.
Australia’s Federal Government reportedly rejected Virgin’s repeated requests for an emergency bailout package, with the airline already struggling with £2.5billion of debt.
“Virgin Australia has entered voluntary administration to recapitalise the business and help ensure it emerges in a stronger financial position on the other side of the Covid-19 crisis,” the airline said in a statement to the Australian Stock Exchange.
The move follows a board meeting of the firm’s international shareholders who voted against providing more financial support.
The airline had asked the Australian government for £710 million but the request was denied.
Virgin Australia’s board has appointed Deloitte as voluntary administrators.
The airline, which services domestic as well as short-haul international destinations, was founded in 2000 by Branson and is one of Australia’s main aviation providers.
Following the news, in a letter to employees posted on Twitter, Branson has promised he will work “day and night” to ensure the airline doesn’t go under, while referring to the fact the government had not stepped in to help as in other countries.
“I am so proud of all of you and everything we have achieved together,” he wrote.
“20 years ago, we wanted to bring much needed competition to Australia’s skies, to lower airfares, to give customers choice, to create thousands of jobs and to put a smile on people’s faces.
“Inspired by that vision, we created Virgin Blue, which grew into Virgin Australia.
“Together we created an airline that embodied the Virgin brand – an incredible team focused upon innovation and great customer experience to make people’s lives better.
“I know how devastating the news today will be to you all,” he continued.
“In most countries federal governments have stepped in, in this unprecedented crisis for aviation, to help their airlines. Sadly, that has not happened in Australia.
“This is not the end for Virgin Australia and its unique culture.
“Never one to give up, I want to assure all of you – and our competitor – that we are determined to see Virgin Australia back up and running soon.
“We will work with Virgin Australia’s administrators and management team, with investors and with government to make this happen and create a stronger business ready to provide even more value to customers, competition to the market, stimulus to the economy, and jobs for our wonderful people.
“Virgin Australia has captured the hearts of Australians. That is down to all of you – past and present – who made it the best airline to fly within Australia.
“This is not the end for Virgin Australia, but I believe a new beginning.
“I promise that we will work day and night to turn this into reality,” he added.
In the UK, Virgin Atlantic has sought a £500million bailout from the UK government.
Branson said the airline needs taxpayer support in the form of a commercial loan.
In an open letter to Virgin Group employees, Sir Richard had said: “We will do everything we can to keep the airline going – but we will need Government support to achieve that in the face of the severe uncertainty surrounding travel today and not knowing how long the planes will be grounded for.
“This would be in the form of a commercial loan – it wouldn’t be free money and the airline would pay it back (as easyJet will do for the £600 million loan the Government recently gave them).
“The reality of this unprecedented crisis is that many airlines around the world need government support and many have already received it.
“Without it there won’t be any competition left and hundreds of thousands more jobs will be lost, along with critical connectivity and huge economic value.”
Experts have said airlines globally could follow Virgin Australia into insolvency unless they get help.
“As the impact of the coronavirus and multiple government travel reactions sweep through our world, many airlines have probably already been driven into technical bankruptcy, or are at least substantially in breach of debt covenants,” CAPA Centre for Aviation said in a statement last month.
“Cash reserves are running down quickly as fleets are grounded and what flights there are operate much less than half full.
“Forward bookings are far outweighed by cancellations and each time there is a new government recommendation it is to discourage flying.
“Demand is drying up in ways that are completely unprecedented. Normality is not yet on the horizon.”
Daily Mirror online