Virgin Australia has confirmed it has entered into voluntary administration, becoming the first large corporate victim of the COVID-19 economic crisis.
At the same time, Richard Branson, billionaire and founder of Virgin Group — a part owner of Virgin Australia — is calling on the UK government for a loan to help prop up the global business, and even offering up his Carribean island home as security.
The COVID-19 pandemic grounded the vast majority of Virgin Australia’s flights. But the business had already been under some pressure, reportedly saddled with a debt of some $5 billion.
Now, the jobs of some 15,000 employees are under threat.
A statement on the voluntary administration said the pandemic came as the business was “progressing on a significant transformation program to reset its cost base”.
The airline’s plea for a $1.4 billion loan from the Federal Government went unanswered, and the company has reportedly been in talks with both the New South Wales and Queensland governments, which have not yet led to any financial support package.
Administrator Vaughan Strawbridge from Deloitte said the intention is to restructure and refinance the business “and bring it out of administration as soon as possible”.
“We have commenced a process of seeking interest from parties for participation in the recapitalisation of the business and its future, and there have been several expressions of interest so far,” he said.
Virgin Australia chief Paul Scurrah said in a statement the decision is intended to help secure the survival of the group after the COVID-19 crisis.
“Australia needs a second airline and we are determined to keep flying,” he said.
“Virgin Australia will play a vital role in getting the Australian economy back on its feet after the COVID-19 pandemic by ensuring the country has access to competitive and high-quality air travel.”
Meanwhile, Richard Branson has been appealing to the UK government for support, and has even seemingly offered up Necker Island, his private retreat in the British Virgin Islands, as collateral.
“Over the five decades I have been in business, this is the most challenging time we have ever faced,” Branson said in an open letter to Virgin Group employees.
“From a business perspective, the damage to many is unprecedented and the length of the disruption remains worryingly unknown.”
The billionaire said his own net worth is calculated based on the value of the group as a whole, and all of that cash is being reinvested “across many companies around the world to protect as many jobs as possible”.
In the letter, he said he has asked for a commercial loan from the British government — it’s believed to be valued at about £500 million ($985 million). And, he included Necker Island as an asset in securing that funding.
“As with other Virgin assets, our team will raise as much money against the island as possible to save as many jobs as possible around the group,” the letter said.