Virgin Australia was poised to go into administration today after failing to secure a government loan.
Australia’s second-largest carrier, Virgin Australia was expected to enter voluntary administration overnight, with reports that Deloitte has been appointed as administrator.
The airline had sought a government-secured loan of A$1.4 billion ($884 million). This was turned down last week.
Australian treasurer Josh Frydenberg said the Australian government was “not in the business of owning an airline”.
However, the Australian government had agreed to pay $A165 million to Qantas and Virgin Australia to maintain key routes through the Covid-19 crisis.
The government had also agreed to waive A$715 million in fees and charges for airlines.
The decision to file for administration followed a board meeting on Monday.
Virgin Australia has a net debt of A$5 billion and had already laid off 8,000 staff.
Paul Scurrah, Virgin Australia chief executive, was expected to address the airline’s 16,000 employees on Tuesday morning.
Sir Richard Branson’s Virgin Group, which owns 51% of Virgin Atlantic, retains a stake of just over 10% in the carrier.
The majority stakeholders in Virgin Australia are Etihad Airlines (21%), Singapore Airlines (20%), and Chinese airline groups Nanshan (20%) and HNA (20%).
Sir Richard has also sought state aid for Virgin Atlantic in the UK, but was rebuffed by the UK Treasury last week.
The airline is understood to be preparing a second, more detailed bid for a loan and credit guarantee.
Branson defended the request for aid saying Virgin Atlantic “will need government support” to stay afloat.
In an open letter to Virgin Group staff on Monday, Branson insisted any state aid “would be in the form of a commercial loan. It wouldn’t be free money and the airline would pay it back.”
Virgin Australia was set up as Virgin Blue in 2000 as a wholly owned subsidiary of Virgin Group.
But Virgin cut its stake to 50% in 2002 as the carrier expanded to fill the gap left by Australian carrier Ansett, which collapsed days after 9/11, and reduced its holding further over subsequent yeas.