Daily Update
Orient Aviation COVID-19 Briefs: Region's Major Developments Today
April 21st 2020
DOWN BUT NOT OUT AT VIRGIN AUSTRALIA
The Virgin Australia [VA] board has formally placed the airline group into voluntary administration. Deloitte's Vaughan Strawbridge and colleagues, John Greig, Sal Algeri and Richard Hughes, have been tasked with recapitalising the business. VA CEO, Paul Scurrah, and the current management will remain in place during the turnaround effort. Read More »
Deloitte administrator Strawbridge told reporters in a conference call earlier today he planned to have a new owner in place within a few months. He said more than 10 "sophisticated" parties had shown an interest in the airline group. He said no redundancies are planned and stood down workers would be able to continue to access the Australian federal government’s wage subsidy program.
At the conference call, Scurrah said the airline group had presented the federal government with nine different bailout proposals. All of them had been rejected which left VA with no option but to appoint an administrator to find a new owner, he said.
VA said it would continue to operate government subsidised domestic and international flights while in voluntary administration.
The airline group's frequent flyer program, Velocity Frequent Flyer, was not placed into voluntary administration. However, the program said in a statement all points redemptions would be paused for the next four weeks as "unexpected demand" in recent times from members to redeem items such as gift cards, electronic goods and wine had "made it difficult for our suppliers to provide these offers and limits the availability for all members to redeem their points".
Founder of UK-based Virgin Group, Sir Richard Branson, who holds 10% of VA stock, vowed this process would not be the end of the Australian carrier and expressed determination to see it up and running soon.
"We will work with Virgin Australia’s administrators and management team, with investors and with government to make this happen and create a stronger business ready to provide even more value to customers, competition to the market, stimulus to the economy and jobs for our wonderful people," Branson said in a public letter.
Melbourne Airport CEO, Lyell Strambi, said in a statement the VA situation was "potentially another seismic shock to domestic aviation in Australia on top of the demand destruction brought about by COVID-19".
Australian Council of Trade Unions [ACTU] president, Michele O’Neil, called on the nation’s government to put together a rescue plan and ensure there were two airlines flying in Australia. “This is do or die for the Morrison Government. They can choose to save the jobs of 16,000 Virgin Australia workers or they can choose to abandon all these workers and hand Qantas a monopoly,” O'Neil said in a statement.
Australian prime minister, Scott Morrison, told reporters the voluntary administration process represented a "road out and forward into the future" to ensure VA could "emerge on the other side". Morrison defended the federal government's decision to withhold direct financial support for the group, saying it would have sent money to VA's foreign shareholders.
Australia’s opposition leader, Anthony Albanese, argued the federal government needed to step in and support VA and added talk of wanting a market-based solution to resolve the situation was a triumph of ideology over common sense. "We have to bear in mind that this crisis is not a result of market failure, it’s a result of a government decision to shut the market," Albanese said, referring to the closing of international borders and restrictions on interstate travel in Australia.
The federal government has appointed investment banker, Nicholas Moore, the former CEO of Macquarie Group, to work with the administrator on behalf of the government.
In North Asia, All Nippon Airways [ANA], announced at the turn of the week that revenue and profits were expected to be "significantly lower" in its fiscal 2020 financial year than previously forecast amid a sharp decline in travel due to the coronavirus pandemic. The financial guidance said net profit for the 12 months, to March 31, was expected to be in the vicinity of 27 billion yen (US$251 million), 71.3% lower than the 97 billion yen forecast previously.
On April 18, ANA announced its total flight suspensions and capacity reductions reached 4,097. Japan Airlines has cancelled or suspended 4,071 flights.
Japan has extended its State of Emergency to nationwide until May 6.
Korean Air has provided additional protective equipment to its cabin crew in the form of gowns and masks. The airline said cabin crew on all flights would wear goggles in addition to masks and gloves, while those crewing medium and long-haul inbound flights to South Korea would have protective gowns "as overseas COVID-19 cases continue to increase significantly".
