There will be no redundancies among 10,000 remaining employees – and while flight credits remain valid their future value isn’t guaranteed

This article is more than 4 months old

This article is more than 4 months old

Virgin Australia plans to continue to operate its current bare-bones service while external administrators try to attract buyers so that the stricken airline can survive the coronavirus crisis.

One of the administrators, Vaughan Strawbridge, said he did not plan to make any of the airline’s 10,000 employees redundant. Employees who were still working would continue to be paid and the approximately 8,000 staff who have been stood down will continue to receive the jobkeeper allowance, he said.

An additional 6,000 contractors and 4,000 suppliers also rely on Virgin Australia, said the airline’s chief executive, Paul Scurrah.

But while the airline will continue as is for the moment, Strawbridge said its future shape after exiting voluntary administration – including how many planes it had and how many routes it flew – was yet to be decided.

Virgin Australia: what does voluntary administration mean and how will it affect you? Read more

Virgin Australia on Tuesday morning told the stock exchange it had appointed Strawbridge, John Greig, Sal Algeri and Richard Hughes of the big-four accounting firm Deloitte as administrators.

The move comes after the federal government rebuffed repeated requests from Virgin Australia for a bailout and despite duelling offers of assistance from the Queensland and New South Wales governments.

Scurrah said he was “disappointed” that the government wouldn’t assist.

He said the airline had initially asked for a $1.4bn loan, convertible to equity in the company, and had gone back to the government eight times with new proposals.

Its final request, for $200m, was rejected on Monday, and the company’s board put the airline into administration that evening.

“The correspondence that was going backwards and forwards was trying to structure it in a way that addressed the government’s concerns around any criticism of potentially nationalising the airline or taking an equity stake,” Scurrah said.

“But ultimately, we didn’t get there.”

Virgin Australia said it would “continue to operate its scheduled international and domestic flights which are helping to transport essential workers, maintain important freight corridors, and return Australians home”, and that Scurrah would remain in place.

Strawbridge said flight credits remained valid but he would not guarantee their future value.

Separately, the airline’s frequent flyer program, Velocity, which is not in administration, has frozen redemptions for at least four weeks.

Strawbridge said more than 10 parties interested in recapitalising Virgin Australia would be sent a circular on Tuesday as part of a sales process that would start immediately.

“The intent is to run hard and we can do that because we’ve got a good sophisticated group of interested parties,” he said.

He said he would be seeking expressions of interest within the next three weeks, after which a sales process would take four to five weeks before entering any transaction.

“I do think government has an important role to play, but it will not be – it doesn’t have to be – the decisive decision maker through this,” he said.

“The parties who are coming forward do have the financial capacity to take this business forward.”

Potential buyers include BGH Capital, a private equity fund run by Ben Gray, the son of the former Tasmanian premier Robin Gray.

Gray was formerly the Australian head of US private equity group TPG, which was behind the disastrous stock market float of the department store Myer in 2009.

The billionaire Richard Branson, who is a minority shareholder in Virgin Australia, said in most other countries national governments had stepped in to bail out airlines.

An industry in crisis: can Australia afford to have just one airline? Read more

“Sadly, that has not happened in Australia,” he tweeted.

In a direct attack on the airline’s bigger competitor Qantas, which has campaigned against a bailout, he said Virgin Australia would fly again.

“This is not the end for Virgin Australia and its unique culture,” he said.

“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.”

Richard Branson (@richardbranson) Dear @VirginAustralia team. I am so proud of you and everything we have achieved together. This is not the end of Virgin Australia, but I believe a new beginning. I promise that we will work day and night to turn this into reality https://t.co/GJH1zhEqEd pic.twitter.com/GelLiA6DKG

The Labor leader, Anthony Albanese, said the collapse was “a failure of leadership from Scott Morrison whose piecemeal approach to aviation did nothing to support the airline through this crisis”.

“The current structure of our aviation industry with two major airlines supports hundreds of thousands of jobs, promotes competition and ensures services regularly reach all Australians,” he said.

“Now that he has let the airline fall into administration, Scott Morrison must outline a plan to take an equity stake in Virgin and ensure we continue to have two major airlines in this country.”

A former Transport Workers’ Union head, Senator Tony Sheldon, implored the government not to take the same route as it did with Ansett Australia, which saw the airline collapse and cease to exist after attempts to refloat it failed.

“I’ll just say this very bluntly, and that is that Scott Morrison allows this company to bleed out, and allow corporate raiders to feed on the carcass of Virgin, then that’s not a national aviation policy,” he said.

“That’s a policy that sees 16,000 families in Australia not being stood up for by the prime minister.”

The Australian Council of Trade Unions said it was not too late for the government to rescue the company by acquiring a stake in the airline, arguing that a collapse would cost taxpayers dearly.

In a statement, the ACTU said a failure to rescue Virgin Australia would leave the government with an $800m bill to pay out the entitlements of the workforce under the fair entitlements guarantee scheme and “open the door to a monopolistic takeover of our skies”.

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The ACTU president, Michele O’Neil, said this was a “do or die” moment for the government.

“If the Morrison government does not immediately intervene, they will be responsible for the biggest airline collapse in Australia’s history,” she said.

The federal government has retained former Macquarie Bank chief executive Nicholas Moore to engage with Deloitte, signalling there may still be scope for some federal assistance.

The treasurer, Josh Frydenberg, said Moore’s role was to work with the administrators during the voluntary administration.

“It’s a well-known path for corporations to restructure and recapitalise,” he said. “We want to see a market-led solution.”

Speaking on ABC radio before the announcement, the finance minister, Mathias Cormann, again played down any prospect that the government might take part in a bailout.

He said the government had already provided support to the airline sector by waiving fees and charges on flights and subsidising domestic flights.

“Virgin had serious challenges prior to the coronavirus pandemic,” he said.

“We do want to see two airlines continuing. There is a clear public interest in competition in the aviation sector in Australia. The first responsibility to bail out a company rests with its shareholders and Virgin has some very substantial foreign shareholders.

“If those owners of the business are not prepared to step in there is a process here to test the market to see who else might be prepared to come forward and that is the opportunity in front of us.”