Dateline: November 18, 2020.

Virgin Australia has become the first major Australian airline to exit voluntary administration, with its new CEO and managing director unveiling its future direction.

On her official first day as Virgin’s boss, Jayne Hrdlicka showed off the airline’s plan resulting from collaboration with staff and combined with detailed customer research.

It includes retaining its core lounges and reimagining the lounge experience, retaining three choices of seating (economy, ‘Economy X’ and ‘business’), leveraging new technology for a simplified check-in and airport experience, and cheaper airfares.

The plan will see the airline compete in its mid-market heartland for guests who want a more premium experience at an affordable and competitive price.

While Virgin will serve all segments of the market, the carrier plans to build its proposition around its longstanding and most loyal guests, which include price-conscious corporate travellers, small-to-medium-sized businesses, premium leisure travellers, and holidaymakers.
The plan’s major elements are:

• A commitment to retain a domestic market share of roughly one third (as was pre-COVID).
• A network of lounges to open as travel demand resumes, with the Brisbane lounge reopening today.
• A new-look Virgin Australia lounge of the future will open in Adelaide in early 2021, which will roll out across the lounge network over time.
• Creating a more accessible business-class offering to better align to the expectations of the cabin’s core customers.
• New self-service and assisted check-in and baggage drop facilities will open at mainline airports.
• The launch of an updated and more integrated Virgin Australia app providing an enhanced guest experience for Velocity Frequent Flyer members.
• A comprehensive network of domestic and regional destinations.
• A commitment to regional Australia, including the restructuring of Virgin Australia Regional Airlines to become a more sustainable and profitable business following a comprehensive business review.

Speaking at Brisbane Airport where she spent her first official day as Virgin’s boss, Hrdlicka said the airline has exited voluntary administration “with a renewed sense of who we are and who we are here to serve”.

“It’s a privilege to join Virgin Australia as CEO at such an important moment, and I’ve spent the past few weeks meeting and listening to our team and hearing their ideas,” she said.

“I’m impressed with their understanding of and passion for our guests, and look forward to their continued input as we work to refine our plans and define our future together.\

“The travel environment is changing and so are our customers’ preferences. We know that leisure travellers, small and medium businesses, and many corporates are now emerging from COVID-19 wanting better value.

“They are hungry for flexibility and choice, a trusted brand that resonates with their values, and great prices, along with the premium features they value most.”

Hrdlicka said Virgin’s post-administration plan will ultimately give customers what they value without the big price tag, such as premium lounges, a new and fresh retail offering on board, a choice of cabins, better digital technology and a more streamlined check-in experience.

“We will also continue to deliver our award-winning service, strong network of destinations, an award-winning frequent flyer program and a safe and reliable operation,” she added.

“Australia already has a low-cost-carrier and a traditional full-service airline, and we won’t be either. Virgin Australia will be a mid-market carrier appealing to customers who are after a great value airfare and better service.

“We will continue to evolve our offering for our customers based on data and feedback, but the Virgin Australia experience millions of travellers know and love is here to stay.”
Hrdlicka said the airline has emerged from administration stronger, more competitive and ready to face the challenges ahead.

“We removed an enormous amount of complexity from our business, greatly improved our cost base, and have an extraordinary team on the ground and in the air to deliver our new plan,” she said.

“We are more resilient than ever and have the backing of Bain Capital, who are deeply invested in seeing us succeed over the long term.

“As we have seen with the recent issues with South Australia, the travel market remains uncertain. We are, however, seeing some positive signs of recovery. Borders are beginning to open and a potential vaccine is on the way.

“We expect continued volatility, but as demand recovers, we’ll achieve a market share consistent with our pre-COVID position and continue to invest in, and grow, the fleet in line with increases in demand.

“Shaping our future will be a collaborative effort across the Virgin Australia Group and I’m thrilled to see the genuine excitement from our people about the future of their airline.”

Administrators have their say

Virgin’s lead administrator, Vaughan Strawbridge from Deloitte Restructuring Services, described the process as “one of the most challenging administrations in Australia’s corporate history”.

“This has been a very complex insolvency appointment, further complicated by the fact that the process was undertaken and completed during Australia’s COVID-19 shutdown,” he said.

“Since our appointment on 20 April this year, the approach we have taken, including how the sale was structured, has involved significant amounts of work and innovative approaches to a wide range of tasks and issues, many of which have not been encountered previously in either Australian or international market contexts.

“We have certainly had our fair share of challenges, but we have remained focused – undertaking a process with the objective of ensuring the business continued, to maximise job retention and ensuring the best outcome for all creditors.”

While the administrators’ formal role with Virgin has come to an end, Strawbridge said he and his team will continue to represent the interests of creditors as theyy manage the process to assess claims and make distributions to creditors.

The deeds of company arrangement, which were formally approved by creditors in September, will see unsecured creditors receive between nine and 13 cents in the dollar on their claims from a pool of funds of between $462 million and $612 million.

Bain will also honour the value of all customer travel credits and prepaid flights provided post-administration, and provide continued employment for the majority of employees and pay staff entitlements in full, including for those leaving the business.

Strawbridge said the most challenging part of Virgin’s administration was the human element – “seeing the impact on so many people, their industry in turmoil and the impact on the careers they have chosen”.

“Recognising the human impact of the airline going into administration, we have used this as motivation to make sure we remained one hundred per cent focused on achieving the outcome we have, driving through adversity and challenges as they arose, and there were a lot,” he said.

“While the outcome of the process is extraordinary, as administrators, we do acknowledge it has come at a cost for many Virgin Australia employees who have lost their jobs, and suppliers and creditors who will not receive all of the monies owed to them, and investors who will receive nothing.”