Virgin Australia goes into administration

Virgin Australia has formally entered voluntary administration, the airline has confirmed, with Deloitte representatives appointed as administrators.

Both Virgin Australia and "a number of its subsidiaries" form part of the administration process, although Velocity Frequent Flyer is excluded.

"Velocity Frequent Flyer, while owned by the Group, is a separate company and is not in administration," Virgin Australia confirmed in a statement to the ASX.

Virgin Australia will continue to operate its scheduled domestic and international flights, and its current management team will work with administrators, employees, suppliers and partners throughout the process.

Vaughan Strawbridge, one of the company's appointed administrators working for Deloitte, said that "our intention is to undertake a process to restructure and re-finance the business and bring it out of administration as soon as possible."

"We are committed to working with Paul and the Virgin Australia team and are progressing well on some immediate steps," Strawbridge adds.

Virgin Australia Group Chief Executive Officer, Paul Scurrah, adds: "our decision today is about securing the future of the Virgin Australia Group and emerging on the other side of the COVID-19 crisis."

As reported last night by Executive Traveller, the Velocity Frequent Flyer program has suspended the ability to exchange Velocity points for merchandise, such as through the Velocity Reward Store, the Velocity Wine Store, and previously, via online retailer Onsport.

As of April 21 2020, the program has also now suspended all uses of points – including on flights – for at least the next four weeks.

Read: Virgin Australia freezes Velocity frequent flyer points

PREVIOUS [April 20 2020] | Virgin Australia is set to enter voluntary administration, The Australian Financial Review reports, casting doubt over the company’s 10,000-strong workforce and the future of the country’s second-largest domestic airline.

Virgin had been seeking a $1.4b loan from the federal government – or failing that, other methods of financial assistance – but beyond the government underwriting a ‘minimum domestic network’ on a break-even basis, these requests were ultimately declined.

Read: Qantas, Virgin restart flights with $165m gov’t subsidy

ABC News shared on air that Deloitte is set to be appointed administrator to Virgin Australia, and that Virgin Australia’s board are meeting in the evening of Monday April 20 to discuss the future of the airline, which may see it enter voluntary administration this week.

Virgin Australia CEO Paul Scurrah had previously flagged the possibility of turning the company over to administrators if financial assistance didn’t come its way – either from the Australian government or the company’s major shareholders in Etihad Airways, HNA Group, Nanshan, Singapore Airlines, and Virgin Group.

It’s expected that Virgin Australia flights would continue as scheduled while any administration process is underway.

Virgin Australia halted trading of its shares on the ASX on April 14, before suspending them from official ASX quotation from April 16 for up to seven days. As of April 20, its shares remained suspended.

Impacts on Velocity Frequent Flyer

Frequent flyer points held in the airline’s Velocity Frequent Flyer program are believed to be secure, with the airline confirming last week that “Velocity is set up in a way that safeguards member value by having a trustee that looks after the interests of members.”

However, the ability to use frequent flyer points on flights has been severely curtailed for the time being, while other redemption options such as online shopping have either been suspended or are currently unavailable.

As of Monday evening, the Velocity Wine Store – at which members can exchange their frequent flyer points for wine, beer and spirits – ceased taking new orders, including purchases paid for using money, “as we work our way through an unprecedented number of existing orders.”

“We are working towards having our website and telephone order lines open again very soon,” a message on the website reads.

The Velocity Reward Store, where members can swap their points for other merchandise such as gift cards and kitchen appliances, had crashed at the time of writing, returning “502 Bad Gateway” errors when attempting to browse: an error message that can commonly occur when a website is facing extremely high demand.

Also read: What happens to your frequent flyer points if an airline goes bust?

Last week, online retailer Onsport also blocked the ability to spend Velocity points on purchases, and advised that any orders placed on or before April 17 that had been paid for using Velocity points may be held for up to 28 days before being shipped.

“As a result of COVID-19, we've recently experienced a significant increase in the number of orders paid for via the redemption of Velocity Points within the Onsport cart,” the company confirms.

“Consequently, we have temporarily suspended Velocity Points redemption as a payment option,” although the company notes that customer demand remains high in general, particularly as gyms around the country remain closed and people look to alternative options, such as home-based workouts.

Velocity members can continue to earn Velocity points from the program’s range of partners, including credit cards, Ola rideshare, Flybuys transfers, and more.

Also read: Private investors circle Virgin Australia for takeover

Chris C.

Chris is a a former contributor to Executive Traveller.