Virgin Australia was placed in a trading halt this week. The trading halt was to announce that the airline had requested a $1.4 billion ($US843 661 000, £681,863,000, €777,315,000) loan from the Australian government.
Virgin has about 6 months of reserves, but requested the loan to “bolster the airline’s ability to reinstate workers once the virus is contained.” according to The New Daily. Further media reports the request would give the government an equity stake if the airline was not able to repay the loan in 3 years.
The Sydney Morning Herald (SMH) reports a source stating that Qantas told the government it doesn’t want further financial support and believes it can weather the crisis. But the airline would insist on a $4.2 billion ($US2.5 billion, £2 billion, €2.3 billion) loan if the government acceded to Virgin’s loan request, in order to “level the playing field.”
Earlier this week Australia’s Deputy Prime Minister, Michael McCormack told SMH he was “speaking with industry stakeholders and representatives daily, making sure they’re receiving the support they need and listening to what else may be required as the pandemic continues. Everything we are doing as a government in response to COVID-19 is focused on saving lives and livelihoods. As a sector that employs tens of thousands of Australians, the aviation industry is a crucial part of that.”
Finance Minister, Senator Mathias Cormann told ABC News Australia “it is not our plan to take a stake in an airline,” and “we are committed to ensuring that through our policy settings and the like, that on the other side we have two competitive airlines. That we have an aviation sector with two major airlines competing with each other.”
Today, 9 News said the Prime Minister has cast doubt on a loan for Virgin. 9 News stablemate, the Australian Financial Review (AFR) reportedly says the government would prefer the airline survive but wouldn’t bail it out. Instead it could see it collapse and facilitate another airline like Air New Zealand or Ryanair to take it’s place. A Ryanair solution would leave Qantas as the only full service airline in Australia. The government also suggested the airline make use of the recently announced government wage subsidy of $1500 fortnightly (2 weekly). The subsidy is paid to companies with a significant drop in revenue due to COVID-19, and pays companies $1500 ($US906, £732, €833) per fortnight for every worker they retain.
SMH, another 9 News stablemate says Virgin Managing Director, Paul Scurrah disputes the reports. “That certainly hasn’t been the message we’ve been getting from the government. We’re continuing to work on that package.” SMH also understands cabinet is divided on any bailout for the airline.
This morning Australian Competition and Consumer Commission Chairperson, Rod Sims, told radio program RN Breakfast, “We desperately need two full-service airlines when this is over. Whatever the government does is fine by me.”
Virgin Australia ownership:
Singapore Airlines 20.09%
Nanshan Group 19.98%
HNA Group 19.82%
Virgin Group 10.42%