BRISBANE – The future of Virgin Australia, in which Singapore Airlines has a significant stake, is reaching a critical stage with indications the debt-laden airline is heading for voluntary administration.
But while Virgin Australia may have almost shut down its business – at least temporarily – there is no shortage of speculation about the airline’s future. That speculation includes interest from several private equity groups.
The airline’s prospects have rallied in recent days with the state governments of Queensland and New South Wales both offering to bail out Virgin with substantial funding.
Both offers come with conditions. Queensland wants Virgin to keep its base in Brisbane while New South Wales wants Virgin to move its HQ to a new airport being built in Sydney’s west.
The offer from NSW drew a furious response from Queensland, where the state development minister hit back, "NSW might want to bring a peashooter to the fight, that's fine, we'll bring a bazooka and we're not afraid to use it."
Virgin Australia is majority foreign-owned by Etihad Airways (20.94 per cent stake), Singapore Airlines (20.09 per cent), Nanshan Group (19.98 per cent), HNA Group (19.82 per cent) and Richard Branson's Virgin Group (10.42 per cent).
The Australian government says it will not bail out Virgin Australia and wants its owners to come to the rescue.
At the moment that appears unlikely although this could change if Virgin is placed in administration and private equity closes in on a deal.
In that scenario, the existing shareholders would be wiped out.
That’s something likely to trouble the owners of Singapore Airlines – the Singapore government.
But will it trouble the government enough to launch a rescue package for Virgin Australia?
We’ll know soon enough.
UPDATE: Virgin Australia confirmed on April 21 it had gone into voluntary administration, handing the airline over to insolvency experts to restructure the business and find new owners to keep it flying.