SYDNEY • The collapse of Virgin Australia Holdings after the briefest of fights indicates the world's weakest airlines have little time to secure funds before they succumb to the coronavirus.
The debt-laden carrier, which is 20 per cent owned by Singapore Airlines (SIA), became the outbreak's biggest airline scalp when it handed control to administrators on Tuesday. A near-halt in passenger revenue overwhelmed the carrier in less than two months.
"We should get used to news of this kind," said Associate Professor Volodymyr Bilotkach, a lecturer in air transport management at the Singapore Institute of Technology. "We'll see more airlines go under."
The speed of Virgin Australia's unravelling suggests industry groups have not been exaggerating in raising the alarm with increasing frequency. The International Air Transport Association (Iata), which represents nearly 300 airlines, has said half face bankruptcy in two to three months without government help. Many carriers have furloughed staff and grounded entire fleets. Iata has warned that 25 million jobs in aviation and related sectors are at risk.
In Australia, the government rejected Virgin Australia's initial plea for a A$1.4 billion (S$1.3 billion) loan. Several other proposals for state aid met the same response, according to chief executive officer Paul Scurrah, until a final request for just A$200 million was rebuffed on Monday.
Other carriers struggling to tap rescue funds are also teetering.
Virgin Atlantic Airways is battling to convince a sceptical British government to provide backing, with billionaire founder and 51 per cent owner Richard Branson saying on Monday it will not survive without outside help.
Discount airline Norwegian Air Shuttle, which has grounded its entire fleet, said on Monday that it put four pilot and cabin crew units in Denmark and Sweden into bankruptcy protection because it could not pay salaries. The company has floated a debt-for-equity swop in a bid to meet the terms of bailout funds from Norway's government.
South African Airways, which last made a profit in 2011, plans to lay off its entire workforce after failing to persuade the government to give more financial aid. The coronavirus may prove too much for the 86-year-old airline, which was reducing routes and considering job cuts even before the outbreak.
With more than A$5 billion in debt and a run of seven consecutive annual losses, Virgin Australia was already financially frail.
Mr Scurrah, who took the helm last year, was in the middle of a turnaround plan to reduce debt and costs when the virus emerged, denying him time to negotiate the funding needed.
The administrators at Deloitte who control Virgin Australia now aim to restructure the business and find a buyer within two to three months. More than 10 parties have expressed interest, according to Mr Vaughan Strawbridge, one of the four administrators. He said on Tuesday that he does not plan to change the airline's operations or fire staff.
Virgin Australia's failure also exposes the perils of running a company by committee. The carrier had one of the most unusual ownership structures in the industry, with four foreign aviation groups - SIA, Etihad Airways, HNA Group and Nanshan Group - each holding stakes of about 20 per cent. Virgin Group owns about 10 per cent.
None of those major investors had ultimate control of an airline that habitually lost money. Shareholders now rank below Virgin Australia's creditors as Deloitte attempts to save the business. Even employees owed wages sit above the company's owners in the event of a liquidation.
Virgin Australia joins FlyBe Group, which was Britain's biggest domestic airline before it collapsed last month, as early corporate casualties stemming from the virus.
Ravn Air Group, whose airlines connect the far reaches of Alaska, recently filed for Chapter 11 bankruptcy after it ran out of cash to pay staff and keep its planes flying, and Sweden-based Braathens Regional Airlines is also restructuring under court protection.