Virgin Australia (ASX: VAH) has collapsed into voluntary administration
. Now what?
What has happened to Virgin Australia?
The combination of no air passengers and burdensome debt has been too much for Virgin Australia to avoid going into administration after it was unable to secure enough support from state or federal governments.
Administration gives the company time to take the steps to ensure the best outcome for the involved stakeholders. The market crash has been tough for everyone.
What’s going to happen next?
There are a number of different outcomes. One of the most likely outcomes is that a potential buyer like BGH Capital may come in to restructure the business and operate less routes.
At the moment Virgin Australia is trying to reset its cost base, ‘consolidate’ its workforce, ‘simplify’ the fleet, withdraw from unprofitable routes and review & negotiate supplier agreements.
There is still the chance that a state government may step up to give the airline a lifeline. Virgin Australia is a big employer in Queensland.
I can understand why the federal government isn’t wanting to commit to saving Virgin Australia. None of the other major shareholders are stepping up – it could be a terrible investment. I think the best outcome would be for another buyer to come in and sustainably save as much of the business as possible.
But I’m not looking at buying airlines right now. I like the look of the technology shares below:
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Disclosure: at the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.
