SYDNEY (Reuters) – Virgin Australia Holdings Ltd is short of money (VAH.AXon Thursday suspended trading in its shares to continue talks on financial aid and restructure alternatives to help it overcome the coronavirus crisis.
FILE PHOTO: Virgin Australia Airlines plane took off from Kingsford Smith International Airport in Sydney, Australia, March 18, 2020. REUTERS / Loren Elliott / Photo File
The second largest airline in Australia said that the discussion remained confidential and incomplete. It does not provide further details, including the identities of those who spoke with it.
The suspension of trade will last for up to seven days, extending the cessation of trade that has existed since Tuesday.
Virgin has so far been unsuccessful in its request to the Australian government for A $ 1.4 billion ($ 883.54 million) in loans that can be converted into equity under certain circumstances.
The opposition Labor Party supports the government’s lifeline for Virgin, which is more than 90% foreign-owned, while its rival Qantas Airways Ltd. (QAN.AX) has said government support must be offered to both operators.
“We want to see two airlines in the domestic market but we are not in the business of owning an airline,” Australian Treasurer Josh Frydenberg said on the Nine television network on Thursday.
Virgin is also in talks with creditors about debt restructuring options such as debt-to-equity exchanges and has employed UBS, Morgan Stanley, Houlihan Lokey and Deloitte as advisers, according to someone with knowledge of the matter.
Entering voluntary administration is a last resort, but the airline believes a decision on government assistance will be needed next week, said an unauthorized person speaking publicly.
Qantas will have an effective monopoly on the Australian market if Virgin disappears. It will be difficult for new airlines to get financing given the current decline in demand and approval of regulations to fly can take about a year to be accepted, analysts said.
Air New Zealand Ltd (AIR.NZ), which is licensed to operate in the Australian domestic market, sold its shares in Virgin in 2016.
The New Zealand carrier is focused on its own survival plan, including a permanent 30% reduction in its workforce, rather than entering the Australian market, according to someone with knowledge of the problem who is not authorized to talk to the media.
“We have no plans to operate domestic services in Australia,” a spokesman for Air New Zealand said Thursday.
($ 1 = 1.5845 Australian dollars)
Reporting by Jamie Freed, additional reporting by Byron Kaye; Editing by Shri Navaratnam and Jane Wardell
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