Virgin Australia suspends refunds, travel credit for cancelled flights

Emails sent to would-be travellers contain bad news for those expecting a refund or even 'travel bank' credit.

By David Flynn, May 7 2020
Virgin Australia suspends refunds, travel credit for cancelled flights

Virgin Australia has stopped issuing credits and refunds for cancelled flights, saying the matter now rests in the hands of the appointed administrators who continue to seek a buyer for the failed airline.

Travellers who had requested a refund or travel credit for a cancelled flight are now receiving emails to advise that neither will be forthcoming, as the airline has "temporarily paused issuing new travel credits and refunds while we wait for direction from the administrator."

The move comes the same week that Melbourne-based law firm Slater and Gordon announced plans for a class action lawsuit against airlines and travel agencies over their refusal to provide travellers with refunds for cancelled trips.

"We believe cash refunds should be returned to customers, who almost certainly need that money right now, rather than (remaining) in bank accounts gathering interest for airline shareholders," said Slater and Gordon Practice Group Leader Andrew Paull.

The high price of a refund

However, a spokesman for airline-appointed administrator Deloitte said that the team has "been logging customer requests for refunds and credits while they work on a solution for affected customers."

"The administrators will be able to provide more certainty on arrangements for those customers in coming days," he said, adding that the administrators aim to have a solution in place within a week.

Refunds would present a heavy drain on the airline's hollowed-out pockets, but holders of travel vouchers would be considered as unsecured creditors in a queue of over 10,000 credits owned close to $7 billion.

That list includes financiers, aircraft leasing firms, airports, suppliers, staff and even the airline's own Velocity Rewards frequent flyer arm, which in 2014 extended to Virgin a $150 million loan  which was never repaid.

"Whilst the holder of the voucher will rank in the process as an unsecured creditor, their engagement with the business as a customer will also factor into the goodwill calculation," suggests Andrew Spring, partner at insolvency and turnaround specialists Jirsch Sutherland.

Read more: With Virgin Australia administration, what happens to travel bank credit?

Will Virgin's new owner honour travel credit?

On that basis, the new owner of Virgin Australia could choose to honour outstanding travel credit as a measure of goodwill to customers.

Deloitte administrator Vaughan Strawbridge has said that travel credits issued to passengers on cancelled flights in lieu of a refund "are still there, they haven't gone anywhere and are intended to be used in the future."

"They are going to be be an important part of the restructure of the business and an important part of loyalty to Virgin Australia" would be customers "being able to access those credits."

Strawbridge revealed on April 30 that as many as 20 parties were circling the airline, describing them as "high-quality bidders with fantastic credentials and the ability to restructure this business."

The first round of "non-binding indicative offers" for Virgin Australia are due by May 15, 2020, with "binding offers" to be presented in June.

"We remain confident that our target of achieving a sale by the end of June is achievable," Strawbridge said.

Read more: 20 cashed-up buyers are now circling Virgin Australia


David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.

30 Apr 2020

Total posts 15

Hard to see the new owner honoring travel credits especially if it becomes a low cost carrier which is the most likely outcome despite what the administrator and the government say. Thousands of jobs will be lost and a new look airline will emerge, can see any other scenario. Its wishful thinking to think it will be business as normal.

Singapore Airlines - KrisFlyer

08 Jun 2018

Total posts 98

David, I don't want to be the harbinger of doom, but with every passing day it looks worse and worse for the future of VA. Consumer confidence in the brand has plummeted. Any buy has no real idea of when demand will return and so has no real ability to generate any cash. There seems to be an expectation that commitments made by the business will be carried forward to the new entity (despite there not necessarily being any legal compulsion to do so).

As a 'going concern' the value of the business, as is, is sinking faster every day. Even any asset based view would need to account for the fact that assets like planes have fallen off a cliff in terms of value. All the rather grandiose and optimistic talks of "20 cashed up buyers circling VA" is looking more and more comical as each drip, drip of bad news comes out.

It doesn't give me any pleasure to say that and I appreciate this forum is for frequent flyers, but some of the comments about the future of the business that have been made are so unrealistic as to be laughable.

It will be interesting to see how many actually make some sort of initial offer by the 15th as the levels of those will determine the actions of the Administrator. I suspect that further Due Diligence by any prospective buyer will only bring out more problems and further drive down value. As I say I hope I am wrong, but sadly wild optimism rarely triumphs over hard headed reality when it comes to investing potentially billions of dollars at the start of what is likely to be the greatest global downturn in living memory. It's somewhat akin to expecting someone to pay top dollar for Lehman Brothers in 2008.

Virgin Australia - Velocity Rewards

15 Aug 2012

Total posts 175

I share your opinion. It's going to be a big ask to invest in the order required where market conditions will be volatile for some time in the aviation segment.

On top of that, competing against Qantas group that's very well run who recently reminded would be investors their Jetstar arm are ready to compete at ridiculously low fares.

Not impossible that VA will get a buyer, but I'm not overly optimistic.

05 Apr 2017

Total posts 12

I tend to agree. Market conditions probably suggest that a hardheaded private equity buyer will be more likely to succeed, if anyone does.


11 Jul 2014

Total posts 728

The gut feeling is getting worse as it does in these sort of things, the golden days of flying with airlines competing for our loyalty look like their over. Consumers will be the losers in all of this and if Indigo get an Australian Lic for the low cost carrier things will get more crappy as Australia can't support 3 airlines and struggles to support 2.

Qantas - Qantas Frequent Flyer

21 Jan 2014

Total posts 327

Still amazed no one has asked for a please explain from John Borghetti over the whole Virgin fiasco, what is becoming clear is that he ran the business so poorly for many many years, a complete failure of epic proportions.


03 May 2013

Total posts 663

As I mentioned weeks ago...where is the board now who approved his strategies year after year??

Qantas - Qantas Frequent Flyer

04 Nov 2011

Total posts 364

Like many others I have a refund that I am still waiting on and I can tell you if that refund is not honoured then I wont be flying with whatever version takes flight again at any point in the future.

Singapore Airlines - KrisFlyer

08 Jun 2018

Total posts 98

I don't disagree with your sentiment, but yet another reason that illustrates why this company is going to be driven into the ground. There is no (or minimal) underlying value and the expectation that a newco will honour every liability for its potentially wholly unrelated predecessor. To put it bluntly - if the business can't be sold as a going concern - this is akin to buying a used car and being expected to pay for the liabilities of the previous owner.


24 Apr 2017

Total posts 77

Hopefully people have used a credit card and can claim a chargeback, because we've all seen what "credit vouchers" or "gift cards" are worth when a company like Dick Smith, Pumpkin Patch, Payless Shoes or Toys R Us Australia goes into administration, they aren't worth the paper they're written on.

Virgin Australia - Velocity Rewards

07 Mar 2016

Total posts 2

Any word on if they'll refund points on redemption flights?

Glad I spent only $590 on my 2 return flight from B'bane to Cairns as I don;t have any hope that we'll get to use the travel voucher. From now on we'll be driving to holiday destinations.


03 Jul 2015

Total posts 17

Joyce has set the cat amongst the pigeons, as have REX.

Any buyer of Virgin would need to think long and hard, and first thing to do would be to flick Branson, and the tarnished brand.

Qantas - Qantas Frequent Flyer

27 Jan 2016

Total posts 18

If a sale were to proceed I'd be getting rid of the brand as a buyer. Less that it's tarnished, but simple bang for buck - paying millions in licence fees per year to use a name that I don't see has cut-through in Australia like maybe it does in the UK. The Virgin America brand disappeared (slightly different circumstances) and no-one blinked. Plus the whole Branson 'upstart' image is wearing a bit thin too.

Virgin Australia - Velocity Rewards

15 May 2015

Total posts 8

I am waiting on a refund of taxes and charges that was for flights cancelled well before Administration. The majority of this money is actually Government charges that Virgin are either not paying or has been refunded. The alternative is to do a credit card charge back or perhaps report to the ACCC as they cannot hold moneys they collect for the Government and that was requested before Administration. The Administrator and Virgin are trying the one rule fits all and they are actually breaking the law

03 Feb 2018

Total posts 4

I redeemed all my Velocity points for a one way ticket in J with SQ to go SYD SIN CDG in mid Feb 2021. Hope borders will be open by then, and no second wave of COVID-19 when the European winter comes around...

Virgin Australia - Velocity Rewards

30 Oct 2015

Total posts 65

One charge back from my credit card, other currently been on hold 2hrs to see where my travel insurance claim for insolvency is at......

Virgin Australia - Velocity Rewards

11 Dec 2016

Total posts 74

I have a flex ticket upgraded to business for an upcoming conference which has now been cancelled.

Would they refuse to refund an flex ticket too? As that ticket type comes with a full refund if cancelled. Unlike the other ticket types.

Not bothered about the minor points used for the business upgrade though.

Qantas - Qantas Frequent Flyer

16 Mar 2018

Total posts 15

Hi All

maybe already covered, but how about a reward ticket booked with Velocity points but in my case with Etihad for end of July? Would I deal with Etihad or Velocity? Do I assume right that Etihad would issue me a credit note and would you see Etihad contact me, instead of me chasing Etihad or Velocity?

Any wisdom is welcome.



Virgin Australia - Velocity Rewards

05 Sep 2013

Total posts 57

If the ticket was issued but Virgin Australia/Velocity then you would need to talk to Virgin Australia/Velocity even if the flight is operated by another airline like Etihad.

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