Virgin Australia Mk II could launch in as little as three months

Chapter 11 and administration are similar with one fundamental difference. In both cases, the existing management remain in place but in administration a insolvency practitioner, in this case Deloittes, has full management oversight and replaces the role of the Board of Directors. US Chapter 11 doesn't have this major change.

Receivership is the next step on the ladder where senior management is replaced and the insolvency firm assumes the role of senior manager whilst liquidation is the end of a business where the insolvency firm is no longer operating the business and only selling the assets to pay debts.

They do not need receivership to replace the management.

Steve24, sorry what I meant was at the press conference Scurrah was leading the administrator most of the time, the government have someone in the mix keeping an eye on proceedings, the normal role of the administrator is to reclaim as much money for creditors as possible.

The role of the administrator is to maximise the return to creditors. It is important to remember that staff are major creditors at this point so keeping them in a job maximises returns for everyone as in a liquidation they and the Tax Office take priority and paying their accrued entitlements and redundancies would greatly reduce the amount of funds available to bondholders and unsecured creditors.

Ka-ching. Right on the money, Reeves35. Perhaps worth adding that the Administrators are also PERSONALLY LIABLE for debts incurred AFTER their appointment, hence they will have a personal interest to run the business prudently and not take any unnecessary risks (if that can be done with the help of Scurrah & Co). They also enjoy the advantage of being able to 'compromise' (or offer much less than 100 cents per dollar to pay out) the debts incurred prior to the time of their appointment - all without any real legal consequences.

Hence, the Airbus A330's, which seem to have been negotiated on dreadful terms (perhaps reflecting the school-boy rush of Mr Scurrah's predecessor) , can only now be 'handed back' to the Lessors, with any unpaid lease payments (or early lease termination costs) probably ranking with unsecured creditors. The current 'fair market value' of those planes on the Lessors balance sheet will come under immediate scrutiny per international accounting standard IAS36. I would expect the Lessors auditors will insist the carrying value of returned planes be written down to $Nil, and that will hit the Lessor's P&L. Add to that, the Lessor will need to fly those planes elsewhere and put them into 'soft maintenance' until ready to fly again. That's another large and real cost to their P&L

An astute Administrator will use those consequence as a means to DRAAAAAAAASTICALLY reduce the lease payments, down to what might seem an obscenely low amount. But as the Lessors are US-based, they enjoy support of the Trump Government backing, so the P&L costs won't send them broke.

A REALLY astute Administrator will appreciate the benefits of having the one type of plane (whether it be Airbus, Boeing, etc.) in the fleet. With the challenges Boeing already had with the 737 Max jets, and now the likelihood of a rapidly dwindling order book, Virgin-2 could negotiate some really good deals once its finances are sorted out during the administration. I won't pretend the understand how the business cases differ between Boeing's 737 MAX-10 and their Dreamliners, but some earth-shattering deals could be struck for an order of 787-9 (or 787-10) Dreamliners for international routes and Max-10 for East-West routes to Perth. Other readers will do doubt opine as to what planes should be used.

But which ever way it goes, Virgin-2 will crave the return patronage of its loyal frequent flyers. There's no better customer to have than a returning customer (new ones are much harder and more expensive to get). Those Velocity members with points can expect to be courted with some truly great offerings. Because, if they're like me and very fiscally promiscuous, they/we could, perhaps, not take the risk and do all our flying with a competitor. Virgin-2 will, IMHO, fail in less than 6 months if it doesn't connect meaningfully with its Velocity members.

So, any Private Equity executives reading these pages who are with the 'sophisticated potential buyers', understand this: your dealing with a far more sophisticated and unashamedly promiscuous group of Velocity members who's loyalty is quite comfortable at the moment, albeit on life support. Do think VERY carefully before you attempt your version of 'First Aid' or think of using cheaper bandages, we're all very capable of getting prompt and immediate attention elsewhere.

Time for bed, I have to be up at 5am for Anzac Day tomorrow (junior's playing the Last Post to the neighbours in the morning!).

Administrators are NOT personally responsible for any further debt the same way they do not benefit from any profit - learn your corporate law before writing such nonsense. Virgin is gone. It is a carcass. A basket case. The worst run airline in our aviation history.

I think Scurrah should stay, thrown in the deep end and then Covid came along. When you think about his short time in Ansett and how long a go that was he's had a lot of time to work out the best options for VA.

Too true. Some of the Board members only have experience pumping petrol at Caltex service stations. Others are welcome visitors to Australia (but don't understand the market down here).

But if the rumour is to be believed, LA was their most profitable international route. I also heard management were extremely pleased with the bookings on the new service to Tokyo Haneda. So if this is in fact the case (and I have heard this more than once) they would be crazy to walk away from these destinations.

As suggested from the CEO of Flight Centre, It might be best to be a domestic only airline for the first 6 + months and then relaunch international services as things go back to normal.

I agree Mightyreds, concentrate on domestic first and make sure things are tracking well then bring international back. I would throw in Fiji as an additional international route that would have been profitable and would be kept. Flights were always full when we went.

AT i agree with you on the low cost option. To me it seemed to be more of a distraction. Maybe if Virgin MkII goes hybrid and uses similar Air NZ concept for fares with seat only option it might work? Otherwise I would just concentrate on being a full service.

Agree, if VA own 4 of the 5 777s, then they don't need to make the call on restarting LAX until there is either a market for selling 777s or flights to LAX.

Only Qantas-philes hope Virgin will abandon flights to LAX. The Delta Sky Club lounges (throughout USA) and Virgin Atlantic's Clubhouse lounges, all with showers, etc., were never well publicised by Virgin (reflecting, perhaps, too many kiddies in the marketing department?).

VIrgin are gone. Done. Whatever comes out of the carcass of Virgin will look nothing like them today, nothing. They have the unenviable record of being the worst run airline in Australian aviation history.

I personally disagree. I think we will see a Virgin Australia somewhat similar in size.

Only time will tell I guess.

You are quite correct MightyReds. The only difference will be £Zero branding royalties to Tricky Dicky Branson. Whether he withdraws the right to use 'Virgin', or his ego to see the name out there reduces the royalty to £1.00 per annum, time will tell. In a y event, but for the name the Virgin product has far more in common with Atlanta USA based Delta Airlines, that owns half of Virgin Atlantic. With a pre-virus mkt value of US$40 billion, and Trump pumping over $400 billion into the US airlines, Virgin could, PERHAPS, be a very cheap price to get a such a strong beachhead onto the AUS market and secure travellers thru US using Delta. Delta will require Administrators to break crazy leases and clean up the balance sheet first, plus a few other things.

Time will tell. But won't take long.

On the other hand, if able to re-launch, why not continue those international sectors (to LAX) that were not only profitable, but the fares on which were slowly increasing because the Business Class service on them was better than Qantas? Gee, if the Administrators replace the ridiculously expensive Airbus A330s in favour of Dreamliners (but keep the bar, as per Virgin Atlantic), they'll crush the competition.

So many opportunities available to the Administrators (all 4 natural persons), its an exciting thing to watch. A re-launched Virgin-2 will live rent-free, in AJ's head.

When was the debt issuing for velocity? Before or after those December accounts were finalised (I don't know the answer but I do know it was pretty substantial $$$ wise).

Look at the balance sheet before making silly observations. The $5.3bn in the December accounts related to interest-bearing liabilities only.

Good point, but research and fact-finding aren't in his wheelhouse, even when that information is in the public domain and less than 4 clicks via Google/ Safari/ etc..

Sounds like you don't trust 'Lil Al?

It will included trading losses suffered since the airlines were closed (the same as is happening to Qantas). Me thinks the chap from Sydney (above) is being 'cute' with the truth.

But then ..... Qantas does have that lovely Chairman's lounge to curry favour with people. And the Virgin lounges in AUS have been looking tired for the last 2-3 years (compared to, say, Virgin Atlantic's Clubhouse lounge at LHR and Emirates lounges).

Oh yes of course Virgin incurred almost $2b in debt in a trading loss .... your blind support of a basket case of an airline is amusing ..... the last week has shown just how little you understand the airline industry ... goodness only a week ago you were talking about how well run they were and here we are this week with administrators uncovering (so far) another $2b owed with more too come .. and it keeps being amusing that the blind support of Virgin always points to Qantas to deflect. Virgin are gone, whatever comes out of this won't be an airline anything like the debacle in the hands of the administrators right now.

As distinct from the Virgin accountants overseeing $7b in debt?

So mate, since 3pm yesterday, to 8pm, the debt increased by $0.2 billion? Which is it? I can see you wish it had increased, but can you please try and keep it factual (and without getting too personal)?

Coming back to you on the laws of corporate administration over the weekend. But feel free to finish your research and modify your other post (before I do).

Accountants should never ever have the keys to a business all they want in compression, a good marketer should run a business with a good accountant as his second.

Faculty of Law, 1998

Monash University, Victoria

One out of fifty aint bad

Its how I know, what I know, about administrations under the Corporations Act, and the roles and obligations of Administrators, particularly the significance of Sub-sections 443A (1) and (2). It's why the appointments of Administrators are of natural persons, not a firm (partnership, company, etc.)?

This will all be over and behind us before the Melbourne Cup !! And Trump will get re-elected with a mjority in both houses on Congress. All will be well for Australia, and we'll all be back to work. But .... buggered if I know who'll be AFL Premiers this year. Korda wants Collingwood, Mentha wants St Kilda, I know who I want. Happy Anzac Day.

That's exactly the type of thinking required. They have to have a different strategy - they lost to Qantas so they have to find a different path.

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