Posted April 21, 2020 20:21:32

Photo: Paul Scurrah said the Government's keenness to see Virgin remain the second national carrier was encouraging. (AAP: Joel Carrett)

Three weeks ago, a cash-strapped Virgin Australia asked the Federal Government for a $1.4 billion bailout. But they didn't get it.

Virgin Australia chief executive Paul Scurrah and even Sir Richard Branson had repeatedly pleaded with the Government to step in and assist Virgin through the unprecedented coronavirus pandemic, but a loan that size wasn't among the support measures the Prime Minister was willing to offer.

Now, the company has been placed into voluntary administration, leaving it up to the market to save the failing airline.

What the Government has said about its resistance to give Virgin a loan

On March 31, Virgin went into a trading halt and confirmed it had asked the Federal Government for $1.4 billion to help it get through the pandemic.

Ultimately, the Government's line was that it is "not in the business of owning an airline".

Part of the reason the Federal Government gave for its reluctance to offer Virgin a loan was that it had already funded more than $1 billion worth of assistance for the airline sector.

That included waiving fees for fuel excise and security screening charges, as well as for select regional routes and last week's announcement that the Government would underwrite the cost to resume some domestic routes.

Remarking on the company going into voluntary administration on Tuesday morning, Deputy Prime Minister Michael McCormack noted Virgin had been able to access most of the money already on the table.

"Virgin has been able to access the initial announcement, where $715 million was put on the table by way of waving fees when it comes to fuel excise, Airservices Australia charges and such things as security screening," he said.

Mr McCormack said Mr Scurrah had told him Virgin had benefited from those announcements to the tune of tens of millions of dollars.

Qantas had complained a Virgin bailout would be unfair

There was also the issue of competitiveness between Virgin Australia and the other national carrier, Qantas.

With its revenue some three times higher than Virgin, that meant if the latter got $1.4 billion, Qantas would want $4.2 billion.

Paul Scurrah complained to the ACCC about Qantas CEO Alan Joyce's comments on March 23, when Mr Joyce told Qantas staff they should lobby their local MPs for any Commonwealth support to the airline industry be offered "across the board", and not just for one company alone.

It followed comments on Sky News where Mr Joyce said the Federal Government could not pick "winners and losers" when it came to propping up airlines, and that governments should not be in the business of supporting companies that had been "badly managed".

Qantas was able to raise $1 billion in additional funding by taking out a 10-year loan secured against its aircraft. Virgin was not in a position to go that route and, on the same day as Qantas got its loan, Virgin was forced to slash domestic capacity by 90 per cent.

Is there a market for Virgin?

The man tasked with assessing Virgin Australia's next step, Deloitte administrator Vaughan Strawbridge, said there had already been more than 10 parties expressing interest in the business and they were "progressing well on some immediate steps".

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He said it would take about three weeks to assess those, and the whole process would be over within "two to three months".

He did not indicate if other foreign airlines were among those to express an interest.

Virgin Australia is saddled with around $5 billion in debt. It has already stood down 80 per cent of its direct workforce and announced 1,000 redundancies in the past few weeks.

Opposition Leader Anthony Albanese said the Federal Government should intervene because it was the decision to protect Australians' health that put Virgin Australia in this situation.

"The Government says that they want a market-based solution … There is no market here today," he said.

The Government wants Virgin back on the other side of the crisis

Treasurer Josh Frydenberg said it was a "difficult day" but said it was not the same as when Ansett Australia went under in the wake of 9/11.

"This is not liquidation. This is not Ansett. This is not the end of the airline," Mr Frydenberg said.

"This is an opportunity for the company to recapitalise and come out stronger on the other side of the coronavirus crisis."

Mr Scurrah said the Government's indication that it was keen to see Virgin survive the voluntary administration process and restore itself as a second national airline was encouraging for the future of the group.

Mr Frydenberg added that the Government was committed to a "market-led solution".

Topics: infectious-diseases-other, respiratory-diseases, covid-19, australia