Virgin Australia's shareholders – including Singapore Airlines, Etihad Airways, Richard Bransons's Virgin Group and Chinese conglomerates HNA and Nanshan Group – are set to be wiped out during the creation of Virgin Mk II, while creditors owed as much as $7 billion will also be short-changed in the process.
That's the prognosis of Deloitte partner Vaughan Strawbridge, who leads the administration team behind Virgin Australia's sale, as the new airline begins to take shape.
“I don’t think anyone is under the illusion that all creditors will get their money back,” Strawbridge told The Australian. “It is very unusual in this process for all creditors to get their money back."
Unsecured creditors are at most risk, and that cohort includes customers holding travel credit vouchers for flights cancelled by Virgin Australia as the coronavirus pandemic took hold.
According to Deloitte, Virgin received about 340,000 requests for refunds after cancelling 65,000 flights between March 1 and April 30.
The administrators will soon begin issuing ‘conditional credits’ to customers on cancelled flights, in place of cash refunds or regular travel bank vouchers, but can't guarantee they would be honoured by the airline’s new owners.
The credits will also have a strict use-by date: they'd be valid only while Virgin Australia remains in administration, and it would be at the discretion of any new owner of Virgin Mk II as to whether any outstanding conditional credits would remain valid.
And then there were eight...
Strawbridge also revealed that of the 19 "interested parties" which have been crunching the numbers on a take-over bid, only around eight have received the "forward business plan around that Virgin 2.0 would look like."
“We have worked with them and provided them with the business plan going forward in order to allow them to finalise their indicative non-binding offers," he said. "It is that smaller group that we are expecting the bids from on Friday.”
However, some of the original 19 could re-emerge as consortium members, under the lead of the eight shortlisters, when it came to presenting a final bid by June 12.
The Queensland Government has emerged as another potential suitor, launching what it calls 'Project Maroon' through the state-owned Queensland Investment Corporation in an attempt to not only bring the failed airline back into the skies and into profitability, but to keep it based in Brisbane.
Strawbridge added that discussions were “focusing around keeping the business together and bringing Virgin as much out of administration in its current form as we can" – indicating that the new Virgin Australia is more likely to resemble the old one, rather than spear off in the direction of being a low-cost Virgin Blue 2.0 play.
“We believe that the highest offer will most likely align with the best outcome for employees,” he told The Australian. “It will be keeping the majority of the aircraft fleet together and taking on the majority of the business, with staff receiving continued employment through that process."