The " Virgin Airline " Scramble !

The Coronavirus outbreak put the final nail in the coffin for Virgin Australia.  This airline  launched in Australia in 2000 and it has struggled with a load of debt. New passenger aircraft are costly items and when the virus forced the airlines to shutter terminals the five billion owing forced the company into administration.

What we are now seeing is a mad scramble by the states attracted by the sixteen thousand jobs on Virgins books.  It is currently based in Brisbane, but both Sydney and Melbourne are very interested and there are about ten very wealthy Australians considering the options of entering the airline business, including transport billionaire  Lindsay Fox.

It seems that the Federal government is reluctant to bail out the airline because most of its stock is owned by several very wealthy overseas airlines.  If Virgin is going to continue flying and providing competition with Qantas it needs to shed that debt and realistically that means bankruptcy and a fire sale of assets, and that will happen unless a white knight comes to the rescue.

Several airlines have tried their luck in Australia over many years and the names Ansett, Compass, Australian National Airways and others ended in financial disaster.  Even Qantas has experienced rocky times but Australia is a vast continent with a small, scattered population and air travel is the obvious reality.

The worst possible outcome would be for Virgin to be restructured with new owners but retaining that five billion debt load.  Realistically, it is a failed airline and the investors have lost their money.  The Virgin name has value and so do the fleet of modern aircraft that should pass to a new investor at a write down figure because of their present valuation.   Those sixteen thousand employees are on furlough and receiving pay compensation from the Federal government. Basically, a new airline could emerge instantly if the present owners of Virgin were realistic and prepared to walk away with whatever value in the dollar the sale of Virgin would deliver.

We definitely need two airlines in direct competition with one another.  We well remember when airlines in Australia were " managed " and the fares charged by the Ansett and TAA duopoly were the highest in the world and the flights followed one another down the airport runways with monotonous regularity.

Eventually, this Coronavirus threat will be overcome and the Australia that emerges will need to find a new equilibrium.  We are a country of tourists and our economy is based on Australia being a world tourist destination.  That is not possible unless it is served by competing airlines offering realistic flight schedules and attractive prices.