Ah Man: Virgin Australia Have Officially Gone Into Voluntary Administration
Well, of course, this was coming. With air travel down more than 95% because of COVID-19 travel restrictions, 90% of Virgin's flights halted and 80% of their workers stood down, it’s unsurprising that Virgin Australia has today gone into voluntary administration.
The decision was made on Monday, after a handful of failed attempts to secure funding from the govt, which would've helped keep the company afloat for another couple weeks.
Accounting firm Deloitte will run the administration process, stripping the company back and attempting to rid it of its $5 billion debt, reports SkyNews.
No official statement from the company – other than a post on Instagram made this morning (Tuesday) – has been made yet, but it’s expected one will be released today.
We bet you have a heap of questions, so here's some more info on what this voluntary administration means for us all, and why it matters.
So, what actually is voluntary administration?
In a nutshell, voluntary administration is a process used to decide on a company’s future direction quickly. An independent third party (in this case, Deloitte) takes full control of the company to try to work out a way to save the company or its business, or to decide whether they should completely shut up shop too. Some recent companies that have gone into voluntary administration include Colette, Kikki K and of course, Napoleon Perdis. RIP.
It’s important to note, though, the administrator’s obligations are towards the creditors (in this case, the people the company owes $5 billion to), not the business.
Not to make it all about me, but what about my Virgin Velocity points?
Virgin has yet to release an official statement on the situation, but it did post to Instagram this morning, writing: “Rest assured we’re still flying and your travel credits are still valid. We’ve been an important part of Australia for 20 years and we’re determined to keep flying well into the future”.
Last week the airline confirmed that “Velocity is set up in a way that safeguards member value by having a trustee that looks after the interests of members,” reports Executive Traveller.
That still didn’t stop Aussies from panic-buying on the Velocity rewards store yesterday when the news was announced. In fact, the sheer traffic caused the site to crash.
At the time of writing this, both the rewards store and Velocity Wine Store are still down.
What does Sir Richard Branson have to say about all this?
Just before the official collapse, Virgin founder Sir Richard Branson wrote an open letter to his Virgin “family” asking for govt support.
“If Virgin Australia disappears, Qantas would effectively have a monopoly of the Australian skies,” he wrote. “We all know what that would lead to.”
Also in the letter, the British billionaire explained why he’s unable to put his own money towards saving the carrier.
An open letter to our Virgin family. For 50 years I have been humbled by the incredible pride our people take in working for Virgin. Here are the facts about Virgin businesses: https://t.co/Nv1RLBhp3j pic.twitter.com/BneE0mZ0Zg
— Richard Branson (@richardbranson) April 20, 2020
“I’ve seen lots of comments about my net worth – but that is calculated on the value of Virgin businesses around the world before this crisis, not sitting as cash in a bank account ready to withdraw,” he wrote.
Branson has also appealed to the UK govt for help in saving Virgin Atlantic, even offering up his luxury Necker Island as collateral, reports the BBC.
How will this impact flight prices in Australia?
We're not there yet, but if Virgin is unable to keep operating, its main competitor, Qantas, would hold a monopoly on air travel in Australia.
If this happens, Aussie travellers could lose out massively, as less competition means higher fares and reduced flight options, reports the ABC. Several aviation experts have forecasted it could take one to five years for a new airline to establish itself, which means a hell of a lot of expensive flights ahead of us.
Seeing that both non-essential domestic and international travel has been banned until further notice, most of us won't notice the affects just yet.
If your head is a little scrambled, make sure you pop over to WHO.int to get all of your official COVID-19 updates.
This article was written by Sangeeta Kocharekar
Main Image Credit: Licensed by Getty
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