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Airline Operation

Virgin Australia, Why Won’t The Aussie Government Rescue The Country’s Second Largest Airline?



Following the suspension of trading of Virgin Australia stocks last week, Virgin Australia announced this morning that due to the sharp decline in travel demand caused by the Covid-19 pandemic and its own high-debt operating conditions, the company will enter into voluntary administration and has appointed Deloitte as the administrator to reorganise the assets in hopes to overcome the difficulties. Since the beginning of this year, Virgin Australia has been hit by this coronavirus pandemic. Since the end of March, all international flights of Virgin Australia have been suspended, and the proportion of domestic flights has also exceeded 60%.
Virgin Australia 737-800 Take off and Taxi
Virgin Australia 737-800 Take Off And Taxi

Virgin Australia was established in 2000 and initially operated in Australia with a low-cost business model under the brand of “Virgin Blue”. After Australia’s second-largest airline Ansett collapsed in the economic crisis followed by the 9/11 event, Virgin Blue quickly captured 30% of Australia’s domestic market share, becoming the second-largest airline after Qantas. In 2011, Virgin Blue transformed into a full-service airline, renamed Virgin Australia, and now has more than 130 aircraft, with a network of more than 41 major domestic and foreign cities. Although Virgin Australia has been operating at a loss for eight years in the past decade, the company contributes 11 billion Australian dollars to the Australian economy and provides employment for nearly 160,000 people. Moreover, Virgin Australia has been an important player in maintaining the balance of competition in the Australian aviation market for many years. Its competition with Qantas has guaranteed the interests of consumers to a certain extent. Some aviation analysts have suggested that if the Australian aviation market is monopolised by Qantas, the average fare will increase by 10-20%.

Faced with the severe blow of the pandemic, Virgin Australia has repeatedly requested financial assistance from the government, A$ 1.4 billion in loans to be exact, but the government disapproved of it. In recent days, Virgin Australia once again applied to the government for an emergency grant of A$ 200 million to maintain its two-week operation. During this period, Virgin Australia continued to negotiate capital injection with potential investors to find a solution. But the government once again rejected Virgin Australia’s application, and immediately, Virgin Australia announced that it had entered into voluntary administration.

Since Virgin Australia made such an important contribution to the consumer market, Why won’t the Australian government rescue the airline when it’s being hard hit?

First of all, the Australian government believes that bailouts of individual airlines are unfair to the market. The Australian Minister of Finance Mathias Cormann said, “We are dealing here with taxpayers’ money, A$ 1.4 billion is a huge amount of money and you’ve got to make sure that the decisions you make are principles-based and that you’re making the right decisions for the right reasons.” At the same time, he denied the possibility of the government becoming a shareholder, and said,” bailing out Virgin Australia would set an inappropriate “precedent across the economy” for the government to bail out big businesses.” Although the Australian government has made it clear that the Australian aviation market requires two large airlines, the government has never stated that one of them must be Virgin Australia. In the context of the free market, even if Virgin Australia collapsed, the government believes that other airlines will enter the market and gradually become airlines capable of competing with Qantas.

Second, the Australian government is reluctant to benefit the foreign capital behind it by supporting Virgin Australia. At present, most of Virgin Australia’s shareholders are foreign capital, including Etihad Airways (accounting for 20.94%), Singapore Airlines (20.09%), Nanshan Group (19.98%) and HNA Group (19.82%). The Virgin Group, its founding shareholder Richard Branson, accounted for 10.42% of the shares, and the remaining shares were owned by other investors. In the current situation, the consortiums that are major shareholders are also in difficulty and have no spare time to take care of Virgin Australia. The Minister of Finance Mathias Cormann stated publicly, “Virgin Australia is a very good airline performing a very important role and this is a difficult day for its staff, for its suppliers, and for the aviation sector more broadly. But the government was not going to bail out five large foreign shareholders with deep pockets who, together, own 90 per cent of this airline.

The third reason is that the Australian government has to consider the intentions of other airlines in the industry. When Virgin Australia requested assistance from the government, Qantas constantly stated to the media that any assistance should be for the entire industry and should be proportional to the size of the company. Such assistance is fair and reasonable. If the Australian government provides assistance to the entire industry according to the company’s size and provides A$ 1.4 billion in aid to Virgin Australia, it will need to provide A$ 5.6 billion in assistance for four times the size to Qantas, together with other airlines, it will overwhelm the government’s finances. Alan Joyce, the chief executive of Qantas, whose financial position is relatively stable, has also repeatedly suggested that the government respect the market rule of “survival of the fittest” and do not need to take care of companies that fail because of their poor management.

Virgin Australia 737-800 Take Off And Taxi
Virgin Australia 737-800 Take Off And Taxi

Although Virgin Australia went to voluntary administration without receiving government assistance, voluntary administration only entrusts professional third parties to manage it. It does not mean bankruptcy and liquidation, nor does it mean that the airline company has ended its life. During the administration period, Virgin Australia will continue to operate. In a statement submitted to the Australian Securities Exchange (ASX), Virgin Australia stated that through the administration process, the company’s assets will be reorganised to enhance its ability to respond to the crisis.

Virgin Australia CEO Paul Scurrah said, There are currently at least 10 potential investors watching the progress of the event“, which includes the Australian private company BGH, and another consortium involving Etihad Airways, which is rumoured to even include China’s state-owned airlines. Australia’s local governments – the Queensland government and the New South Wales government also actively strive to provide financial support for Virgin Australia on the premise of certain bailout conditions: the Queensland government stated that if the federal government permits, it will provide A$ 200 million to Virgin Australia. As a condition, Virgin Australia’s headquarters must remain in Queensland to stabilise local employment; the New South Wales government claims that if Virgin Australia moves its headquarters from Brisbane, Queensland to Sydney, it will provide certain financial assistance.

It has been reported that asset restructuring under administration may make Virgin Australia lose its current structure of ownership with foreign capital involvement. After the outbreak, Virgin Australia may transform into a low-cost airline that initially reduced its size to focus on the more profitable domestic market. A government official said, “under this model, our preferred outcome is that the airline emerges as a competitor with Qantas but not costing the government a dollar.

<strong>Institute For Aviation Research</strong>
Institute For Aviation Research

This article is authorised and translated from IAR’s research publication, the Institute for Aviation Research is an independent think tank that promotes research into aviation. For more info please go to their website below.

Albert K. Field Albert is my name, and travel the world is my game. I began my passion for travel at a very young age, I started this website as a strong means to further explore the world of frequent flyers programs (FFP). The relationship between customers and service providers in the aviation and hospitality industry always seems to be in opposition, however, since the introduction of United Airlines’ Frequent Flyers Programm since 1972*. This has significantly eased the middle spectrum between 2 parties. While the aim of airlines is still to generate more revenue; but for us,as consumers, are also given the opportunity to participate in the bargaining and exploiting from service providers. Living in a world of globalization where big data becomes vital for simulating successful economical activities, most of us will have to travel to other locations whether willingly or unwillingly, while you hearing all this fascinating stories about others, In fact, you too, can blend into the trend. It may not sound like how media illustrates, but indeed there are possibilities for us to have more spontaneous travel without getting held back by financial situation. My website consists of reviews of airline premium cabin products,airport lounges and stay reports of 5-star hotels and their executive lounges across the globe. In addition to all of that, I care the most about their frequent flyers program and loyalty program, which also includes banking partners. Plus, I spontaneously put up reviews and news update regarding premium water brands and restaurants. The purpose of this website is to share all of this information with my audience as well as inviting you to be part of my journey.

1 Comment

1 Comment

  1. Virgin Blue

    April 23, 2020 at 5:38 pm

    nobody: and what do you have to say about that?

    Qantas: ok

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Route Network

SAS To Double Its Capacity In June



Parked SAS Fleet
As more and more countries are easing travel restrictions, SAS, the flag carrier of 3 nordic countries which has cancelled nearly all flights since March, has released a statement in which it will join a growing number of its European counterparts to resume flights to several destinations from June onwards. These routes are primarily domestic flights within and between the Scandinavian countries, with flights to New York, Chicago and Amsterdam from Copenhagen are also set to resume. Scandinavian Airlines’ decision on resuming flights and adding existing service frequencies in all three countries means that SAS is set to double its capacity in June, increasing from having the equivalent of 15 aircraft in service to 30.

SAS has taken a number of measures to ensure your safety and well-being on board.
SAS has taken a number of measures to ensure your safety and well-being on board.

From Copenhagen, SAS is resuming international flights to Amsterdam, New York and Chicago.

SAS has already restored all of its domestic destinations in Norway, it will now add two more Norwegian destinations to Copenhagen from Bergen and Stavanger and one of its strategic oil route from Stavanger to Aberdeen.

In Sweden, SAS is adding four domestic destinations from Arlanda; Malmö, Ängelholm, Kalmar and Skellefteå. SAS is also resuming 2 international routes from Stockholm to Helsinki and Turku, in Finland.

Date of resumptionRoutes
From 1 JuneARN-SFTStockholm – Skellefteå
From 2 JuneCPH-AARCopenhagen – Aarhus
From 8 JuneCPH-AMSCopenhagen – Amsterdam
CPH-BGOCopenhagen –  Bergen
CPH-SVGCopenhagen – Stavanger
SVG-ABZStavanger – Aberdeen
ARN-HELStockholm – Helsinki
ARN-TKUStockholm – Turku
ARN-MMXStockholm – Malmö
ARN-KLRStockholm – Kalmar
From 10 JuneCPH-EWRCopenhagen – New York
CPH-ORDCopenhagen – Chicago
From 15 JuneARN-AGHStockholm – Ängelholm

Updates To SAS Traffic Operation, June 2020

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Route Network

Aegean Airlines Gradually Resumes Flights With Limited International Frequencies



Aegean Airlines A320 Fleet
Greece has entered the third phase of “unlocking” this week, and domestic and international flights have gradually returned. Aegean Airlines issued a statement on May 18, announcing a series of measures and flexible ticketing policies. Aegean Airlines’ president said in an interview that the company suffered serious losses due to the COVID-19 pandemic. This year may be the worst year in the company’s history. At present, Aegean Airlines has resumed flights between the main mainland and Crete, and other islands will resume flights in the next few weeks. In terms of international flights, Aegean Airlines will first resume round-trip flights between Athens and Munich, Frankfurt, Geneva and Zurich, and increased frequencies for their only non-suspended route to Brussels.

Aegean Airlines A320
Aegean Airlines A320

AEGEAN, a Star Alliance member airline, has been maintaining all domestic destinations with limited frequency flight service since 26 March, in an effort to facilitate minimum essential for the island’s needs and a small number of weekly flights from Athens to Brussels in order to maintain the country’s connectivity with the EU’s administrative centre.

Aegean Airlines also operated numerous humanitarian cargo flights for medical and pharmaceutical supplies transportation from China to Greece and Cyprus, in cooperation with the relevant authorities, the airline has operated repatriation flights from various international destinations. 

AEGEAN gradually adds frequencies on domestic network

Following the gradual ease of travel restrictions within Greece and entry regulations to other European countries gradually to be announced, AEGEAN will be enhancing connectivity in its domestic network.

As of May 18th, AEGEAN will be gradually increasing capacity to Heraklion, Chania, Thessaloniki and Alexandroupolis, while additional frequencies will be added to Rhodes, Corfu, Mytilene, Chios, Samos and other domestic destinations, as of May 25th.   

AEGEAN will gradually restore international operations

By the end of May, AEGEAN will gradually restore international operations to some major European destinations. In particular, AEGEAN plans to restart operations from its Athens hub to Munich, Zurich, Frankfurt and Geneva, initially within a limited frequency. At the same time, more flights will be operated to Brussels, which is the only international destination that hasn’t been suspended. 

AEGEAN is willing to gradually restore its network with extreme cautiousness, as stated in the airline’s press statement. While fully respecting the tremendous national effort to control the COVID-19 outbreak within the country, Aegean Airlines’ utmost priority is still to assist authorities in developing relevant health protocols for both passengers and crews.

AEGEAN has already enhanced the increased precautionary measures while boarding and during a flight in preparation for the resumption of flight services, including the mandatory use of a mask during flight, alongside the aircraft cleaning and disinfection processes, and is in close cooperation with the relevant authorities in order to implement additional safety measures with respect to social distancing and sanitation, upon official announcements.

An Aegean Airlines Airbus A320neo in its brand new livery, Greece, May 11, 2020.
An Aegean Airlines Airbus A320neo in its brand new livery, Greece, May 11, 2020. Image Rights: REUTERS/Alkis Konstantinidis

Board Chairman of Aegean Airlines Eftychios Vassilakis told Reuters during an interview stated that Aegean Airlines “burns” 40 million euros every month, and the fixed expenses only cost 25 million euros per month. “The company” burns money “in order to continue flying. Vasilakis said that during the crisis, the Greek government provided financial support to Aegean Airlines. As “You cannot afford to be one of the very few airlines in Europe that have not been helped.” But he did not specify the form and details of the funding.

By the end of the year, AEGEAN will be operating its whole fleet with 65 planes, including the first 6 Airbus A320/321neo aircraft, making it one of the youngest fleet in Europe. Vasilyakis also said that Aegean will be resuming 25% before July and 50% before September, under a best-case scenario,

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