What Virgin Australia’s voluntary administration means for travellers around the world

Apr 21, 2020

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Australia’s second-largest airline Virgin Australia has entered voluntary administration as of 21 April, becoming the largest — but not the only — airline casualty of the ongoing coronavirus crisis thus far.

The airline grew to a fleet of almost 100 aircraft during its 20 years of operation and, for now, will continue to operate a limited schedule for flights that are considered by the Australian government to be essential. Accounting firm Deloitte has been appointed as the official administrator to investigate the airline’s options. This process will allow the airline to attempt to restructure and seek outside investment after its current shareholders and the Australian government declined to provide aid.

Virgin Australia has an unusual ownership structure for an Australian airline wherein 90% of the airline is owned by foreign companies. Etihad Airways owns 20.94%, Singapore Airlines owns 20.09%, Richard Branson’s Virgin Group owns 10.42%, Chinese conglomerates HNA owns 19.82% and Nanshan owns 19.98%. The remainder of the airline is owned by investors.

Related: What should you do with your miles if an airline is going bankrupt?

Virgin Australia Velocity members

If you’re a member of Virgin Australia’s frequent flyer programme, known as Velocity, know that it’s a separate legal entity and has not been placed into voluntary administration. That being said, all options for redeeming Velocity points have been immediately suspended for a period of at least four weeks. The move to suspend redemptions followed a rush of members attempting to empty their accounts as the airline’s financial position worsened.

You can still earn Velocity points by crediting flights operated by Virgin Australia or its partner airlines like Virgin Atlantic, Delta, Etihad, Alitalia, Hawaiian Airlines and Singapore Airlines, as well as cobranded credit cards, online shopping and more, though you will not be able to use those Velocity points for the foreseeable future. Do not be surprised if this suspension period is extended.

For now, travel credits also remain valid. However, you may feel more comfortable using existing travel credits to book a flight on a partner airline that is in a stronger financial position.

Virgin Atlantic Flying Club members

It’s important to note that although both airlines share the Virgin name, they are separate airlines and legal entities. By fleet size, Virgin Australia is the largest airline in the Virgin Group. Interestingly, as both airlines share the same initials, Virgin Australia uses the two-letter airline code VA, which some travellers may confuse with Virgin Atlantic, which uses the airline code VS.

Richard Branson’s Virgin Group owns a controlling stake in Virgin Atlantic (51%), while owning a minor stake in Virgin Australia (10.42%). The financial performance and ongoing viability of Virgin Australia has no impact on the financial performance and viability of Virgin Atlantic.

Virgin Atlantic Flying Club members can still earn and redeem Flying Club miles on Virgin Australia flights. The administration of Virgin Australia has just commenced, but for now, there is no change for Flying Club members. I would not advise redeeming any Flying Club miles on Virgin Australia flights, as these flights may not operate in the future.

For now, anyone with Velocity status can receive status benefits when flying with Virgin Atlantic. Likewise, Flying Club elite members can enjoy benefits when flying with Virgin Australia. Note that strict social distancing means benefits like lounge access are currently worthless while airport lounges are closed.

If you’re taking a flight on Virgin Australia in the immediate future, you can still credit this to Flying Club if you wish. Indeed I would suggest doing this rather than crediting to Virgin Australia’s Velocity programme as right now, there is more certainty around the future of the Flying Club programme than the Velocity programme.

A Virgin Dreamliner taking off from Heathrow (Photo by Nicky Kelvin/The Points Guy)
A Virgin Dreamliner taking off from Heathrow (Photo by Nicky Kelvin/The Points Guy)

What about other partner airlines?

It’s largely business as usual for Virgin Australia’s airline partners and their respective loyalty programme members. Delta SkyMiles members, for example, can still earn and redeem SkyMiles on Virgin Australia flights, noting the caveat above that it is risky using any miles to book Virgin Australia-operated flights in the future given the level of uncertainty around its financial position and flying schedule.

Elite members in partner airline loyalty programmes can still receive status benefits when flying with Virgin Australia, and vice-versa, noting social distancing restrictions.

What about the rest of the Virgin Group?

The Virgin Group has diversified investments in dozens of different companies, from mobile phones to fitness centres and trains. The financial position of Virgin Australia has no bearing on the financial position of other Virgin Group companies.

Sir Richard Branson has published an open letter, stating that without government support, Virgin Atlantic would collapse because of the coronavirus impact. He also referred to Virgin Australia being in the same position.

The Virgin Group has chosen an unfortunate year to launch its Virgin Voyages cruise ship venture with cruise lines one of the hardest-hit industries.

(Photo courtesy of Virgin Voyages)
(Photo courtesy of Virgin Voyages)

Bottom line

This is a developing story as administrators move in and begin to examine the financial position of Virgin Australia and determine if the airline can be restructured, sold or liquidated.

Right now, other than the freeze on redeeming Velocity points, it’s largely a schedule of operations during the coronavirus period. Hopefully, the administrators can work their magic so the airline can fly out of its current financial woes as a stronger airline. However, coronavirus has resulted in unprecedented difficulties for the travel industry, with airlines, in particular, being severely affected. Virgin Australia’s significant financial difficulties started well before coronavrius did — the airline has lost money every year since 2012 — and administrators will have their work cut out for them solving these inherent problems in this difficult environment.

Featured image by JT Genter / The Points Guy

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