Virgin Australia passenger airliner at Melbourne Airport
Virgin Australia passenger airliner at Melbourne Airport

Virgin could go into voluntary administration within days

VIRGIN Australia will not get a "blank cheque" from taxpayers as a corporate game of chicken plays out between the embattled airline and the Morrison Government.

As speculation heightened Virgin Australia Group could be placed into voluntary administration in a matter of days, private frustration was building within the Government over what it believes are "strong arm" tactics and bluffing by the airline.

In an exclusive interview with The Courier-Mail yesterday, Virgin Australia chief executive officer Paul Scurrah warned of "catastrophic" outcomes if the airline collapsed.

Virgin Australia, which is in a trading halt, contributes more than $1.2 billion to the state's tourism industry each year and spends about $1 billion in the industry supply chain.

"Some of those suppliers won't survive this crisis if we don't," Mr Scurrah said.

Virgin's 5000 staff make it one of Queensland's largest employers, with its international hub based in Brisbane and almost half of all flights flying to or from the state.

"The impact not being here would be catastrophic for the Queensland economy," Mr Scurrah said.

"This is where the real heart of our company is."

7. Virgin CEO Paul Scurrah at the Virgin Headquarters in Brisbane. Picture: Glenn Hunt / The Australian
7. Virgin CEO Paul Scurrah at the Virgin Headquarters in Brisbane. Picture: Glenn Hunt / The Australian

Virgin told the ASX on March 13 that it "has a cash position in excess of $1 billion, with no significant debt maturities until October 2021 and no new aircraft deliveries until July 2021".

However, Virgin wants the Government to fork out $1.4 billion to save it from collapse. Highly-placed sources have pointed to its cash position outlined just weeks ago.

It is understood Cabinet is split over how - or whether - they should save the airline. It could come in the form of an equity stake or loan.

The Government wants a viable and competitive sector but some Government sources have questioned why Virgin has to be the second domestic player in Australia.

Highly-placed sources told The Courier-Mail that the Government would not be forced into making a rushed decision and believed Virgin could survive for at least another month.

There is also a view that if taxpayers step in, it could put off other investors.

Singapore Airlines, Etihad, Chinese groups Nanshan and HNA, and Sir Richard Branson's Virgin Group have stakes in Virgin Australia. It is understood Singapore and Virgin Group have not ruled out helping the airline, which grounded its internal fleet last month because of coronavirus.

Tourism Minister Simon Birmingham told ABC television on Tuesday that the Government was saving jobs but could not save all of them.

"We hope and want to see two airlines continue in this country into the future as long as that's possible and viable,'' Senator Birmingham said.

"As Tourism Minister, I ideally want it to be a competitive environment as well and so that's something that weighs on my mind. But ultimately, there can be no blank cheques from Government.

"We can't save every business in Australia.

"There will be some, and where the circumstances are such that they just cannot be saved, and we will have to look to the market to resolve that. But if we can save jobs, we'll do so sensibly and responsibly with taxpayer dollars."

Labor and the Greens are demanding the Government act, saying it must protect jobs.

Labor transport spokeswoman Catherine King said the Government needed to ensure there were two airlines.

"We don't think it's in the national interest for that (a monopoly) to happen,'' Ms King said.

"If we want the tourism sector to recover at the end of this, we want our regions to recover, we need to have two strong airlines.

"Frankly, if the Government doesn't get on with the job now and quickly assist Virgin, I think we're in a really terrible position where it potentially will fail. We'll lose 16,000 jobs."

Mr Scurrah declined to comment on negotiations but admitted the airline has "been talking to multiple sources about capital and liquidity".

"We are prepared to be very flexible on what form that (support) takes," he said.

He refused to speculate on whether the company was considering voluntary administration and if it would be able to pay entitlements.

"That's a piece of work we haven't contemplated," he said.

Originally published as Virgin could go into voluntary administration within days