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Virgin Australia Collapses Under Debt Strain as it Runs Out of Cash

imageStock Markets7 hours ago (Apr 21, 2020 01:24AM ET)

(C) Reuters.

By Gina Lee – Virgin Australia Holdings (ASX:VAH) announced on Tuesday morning that it would enter voluntary administration as the COVID-19 pandemic continues to bite into its income.

The Brisbane-based company joined U.K. budget airline FlyBe as the airline industry’s latest COVID-19 casualty, and the first in the Asia-Pacific region. VAH said in a press release that looks to “recapitalize its business and help ensure it [VAH] emerges in a stronger financial position on the other side of the COVID-19 crisis”.

Deloitte administrators have taken control of the airline and aim to restructure the business. VAH had more than AU$5 billion ($3.18 billion) in debt at the end of 2019.

The company requested an AU$1.4 billion loan to see it through the COVID-19 crisis as the number of passengers and flights fell, triggering an ugly feud with the country’s largest airline Qantas Airways (ASX:QAN)

But the government called on shareholders Singapore Airlines, Eithad Airways, HNA Group, Nanshan Group and Virgin Group to step in instead. VAH’s final plea for AU$200 million in state aid was rejected on Monday.

VAH will continue to operate some flights for essential workers, freight and repatriation of Australians, said the press release.

VAH’s Australian shares were suspended earlier in the month, but last traded at less than 0.86 Australian cents apiece on April 9. Meanwhile Qantas shares jumped as much as 7.2% on Tuesday before paring the gain to 0.28% by 1:19 AM ET (6:19 AM GMT).

Virgin Australia Collapses Under Debt Strain as it Runs Out of Cash

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