Administrators for Virgin Australia are trying to look for someone to buy the airline with nearly $7 billion worth of debt attached to it.
How much is owed?
10,247 creditors (people who are owed by the company) have been found by administrators in charge of the airline, with 9,020 of this being the airline’s very own employees. $450 million is owed to staff.
The cost of going into administration alone is between an estimated $20 to $30 million. Meanwhile, Perth Airport has blocked four Virgin Australia aircraft from leaving as they try to ensure they are paid an owed $16 million by the airline.
Alliance Airlines could be the solution
Experts in aviation have predicted that Virgin could be replaced by the Queensland charter group Alliance Airlines.
If voluntary administration was unsuccessful and the airline collapsed, there would be a huge gap to fill in the domestic flight market in Australia. This would leave rival Qantas a gap too large to fill.
Virgin Australia has shared that their main goal is not to go into liquidation, but rather to be sold or recapitalised.
Neil Hansford, strategic Aviation Solutions chairman, said that Alliance Airlines could very well be the airline to replace Virgin Australia.
“With the right sort of funding or government guarantees, (Alliance Airlines) could upgrade their fleet and get reasonable services going,” Hansford said in a statement. “There’s plenty of ample crew . . . plenty of engineering around.”
Founded in 2002, Alliance Airlines has a Queensland fleet of 50 aircraft.
Alliance Airlines is already providing aircraft and crew to Virgin, currently operating flights from Brisbane, Gladstone, Bundaberg, Moranbah, and Port Macquarie.
Alliance Airlines has $300,000 on the line, which is subject to being lost as the process for Virgin Australia’s administration develops.
Competitors for Alliance Airlines would be the Qantas-owned airline Jetstar, the only other budget airline left in Australia’s aviation market.
There are more than enough suitors
Aside from Alliance Airlines, Vaughan Strawbridge, Virgin’s administrator, stated that they were “in excess of ten companies with a keen interest in being part of the restructuring.”
Before Virgin went into administration, Tom Youl, an IBISWorld aviation analyst, said that the Australian government would prefer two airlines running. While the Australian government neglected to give Virgin a bailout package for their significant debt, they would be quick to replace the airline if it were to actually collapse.
“Air New Zealand would be a good choice,” Youl said, when asked which airline would be suitable to replace Virgin.
If Virgin Australia officially collapses and there are no airlines to fill the gap it leaves, it has been predicted that Qantas would then have the ability to significantly increase their flight prices.
“Virgin and Qantas were in competition with each other which kept costs lower,” Youl stated. “Budget carriers offer a service to people who don’t care about all the extras full-service airlines like Qantas provide. If another budget carrier came in, there wouldn’t be much competition.”
“This is a tough day for our airline . . . (but) we’re certainly not collapsing,” Paul Scurrah, Virgin Australia CEO, shared. “It is our absolute intention to emerge stronger. Australia needs a second airline and we are determined to make sure we are that airline.”