The Administrators of the Virgin Australia Group have confirmed that the airline is tracking well to emerge from Voluntary Administration, following a successful meeting of creditors on 4 September, 2020.
The transfer of shares to U.S private equity company Bain Capital is expected to be completed by 31 October, 2020.
Creditors accepted 10 separate deeds of company arrangement (DOCAs) covering all 41 of the entities in voluntary administration as proposed by Bain Capital. The Bain Capital DOCAs provide for unsecured creditors receiving between 13 and 9 cents in the dollar on their claims (from a pool of funds of between $462 million and $612 million).
The DOCAs also provide for the value of all customer travel credits and prepaid flights provided post-administration and continuation of the Velocity Frequent Flyer program.
“This outcome provides certainty for employees and customers, a return to creditors, opportunities for suppliers and financiers to continue to trade with the Virgin Australia Group as well as maintaining a competitive Australian aviation industry for the benefit of consumers,” says Vaughan Strawbridge, Joint Voluntary Administrator and Deloitte Restructuring Services partner.
In a statement from the airline, Virgin Australia Group CEO and Managing Director Paul Scurrah said: “This is an important outcome for Virgin Australia, which brings us closer to exiting administration and allows us to focus on the future. “ He added, “It’s vital for Australia to have two major airlines for consumer choice, value airfares and to help support the recovery of Australia’s robust tourism sector after this crisis is over.”
What could Virgin Australia look like after the buyout?
Business analysts are anticipating that the airline will consolidate and focus on profitable routes rather than market share. They also expecting the airline to target the price-sensitive business travellers and this has been confirmed by Max Kruse, Virgin Australia’s General Manager Corporate Sales.
In recent discussions, Kruse has reaffirmed Virgin’s commitment to the corporate sector and says that travellers won’t see a lot of change when the airline comes out of administration in October.
Business Class and Economy X will be retained on board. A strong network of lounges will continue to be available and The Club will remain for VIP clients. Velocity is now fully owned by Virgin Australia and all frequent flyer recognition, tiers and status will be maintained. The Accelerate program will also evolve and improvements are expected to be announced in coming months.
Virgin Australia flight credits will continue to be honoured. These are now valid until the end of June 2023, when booked by 31 July, 2022. (CBT will update ticket on hold reports accordingly.)
The carrier’s regional network will remain strong, though flights that service the smaller leisure markets will be reviewed. Partnerships with carriers such as Alliance will continue to play an important role in the future coverage of regional areas.
While Virgin Australia is anticipating a slow recovery for long haul travel, the airline is already planning its return to overseas destinations and will operate an all-Boeing fleet in the short term. Virgin Australia CEO Paul Scurrah has confirmed that they will introduce a new widebody fleet as international travel restrictions ease and they can return to former ports.
New Zealand is flagged to be the first international services to resume. The airline also hopes that the U.S.A and Pacific Islands will form part of their international recovery plan.
If you have any queries regarding flight credits or upcoming trips with Virgin Australia, please don’t hesitate to contact your CBT team.