Virgin Australia has gone into voluntary administration after its pleas to government for a multi-billion bailout went unanswered.
Buckling under its $5 billion debt, the struggling airline has been desperately looking at other options including talks with Queensland and NSW who were both offering cash incentives to base their headquarters in their respective states.
The announcement has left its 16,000 staff in limbo and millions of members of its Velocity frequent flyer program face an uncertain outcome as administrators Deloitte begin the administration process.
Transport Workers’ Union National Secretary Michael Kaine said it was “a terrifying moment for thousands of Virgin workers”.
“The airline has two decades of providing decent jobs, a safe working environment and excellent service for the travelling public,” he said.
“It is a viable and much needed business and without it Australia will struggle to get its economy back on track once the crisis abates.”
Virgin’s shareholders face being wiped out while its lenders also face heavy losses.
The 10 million members in Virgin’s Velocity frequent flyer scheme may also see their points wiped out, as was the case when Ansett collapsed in 2001.
Deloitte will no doubt be looking for a buyer to keep the airline flying with speculation a number of Chinese carriers were eyeing it last week.
By going into administration Deloitte is now able to break leases on planes if it wants to slim down its ongoing costs, making it more attractive to a potential buyer.