The Morrison government has ruled out a government-funded bailout for the troubled airline Virgin Australia Holdings Ltd (ASX: VAH).
Speculation had been mounting that the Federal Government might have been looking at a cash-for-equity-style bailout for Virgin, which would have diluted existing shareholders in exchange for a government stake in the airline. Virgin entered voluntary administration yesterday after failing to secure enough government support to keep the doors open.
Instead, the government would be working with administrators in this case in order to facilitate a “market-led solution” with the appointment of former Macquarie Group Ltd (ASX: MQG) chief Nicholas Moore for the role.
“Nicholas Moore is someone who is very well respected for his tenure at Macquarie – 10 years in the role – but also he brings to the table specific skills and expertise which will be complementary to the ones that we have within Treasury and Finance, and obviously he’ll be working with our team to ensure that the national interest is advanced and he will be having that engagement with the administrator, Deloitte,” Mr Frydenberg said.
“Our objective is a market-led solution. Our objective is two commercially viable, major domestic airlines operating in Australia. And we will work constructively with Deloittes through Nicholas Moore and our Treasury and Finance teams from here,” Mr Frydenberg further commented.
No job cuts at Virgin
The AFR also reports that Deloitte administrators have confirmed there were “no plans” for job cuts or redundancies at the embattled airline, due to the faith of administrators that a “restructuring will be achieved in a short period of time”.
Virgin CEO Paul Scurrah has said that “more than 10 parties” have expressed interest in a recapitalisation of Virgin, including Virgin Group founder Sir Richard Branson (whose company already owns a stake in Virgin Australia).
In some good news for Virgin customers, the company and its administrators have also stated that Virgin will honour its Velocity frequent flyer points program for customers as well as flight credits that would-be travellers have been awarded in recent months as the coronavirus forced the aviation industry into the deep freeze.
But it looks as though it will still be an anxious wait for Virgin Australia’s existing shareholders as the administration process unfolds.
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