Virgin Australia seeking government loan to weather coronavirus crisis

FILE PHOTO: A Virgin Atlantic Airbus comes in to land at Heathrow aiport in London, Britain, June 25, 2018. REUTERS/Toby Melville/File Photo

SYDNEY (Reuters) – Virgin Australia Holdings Ltd (VAH.AX) said on Tuesday it is seeking a government loan of A$1.4 billion ($862.68 million) and exploring other options to get through the coronavirus crisis.

“It is a preliminary proposal and remains subject to approval by the Virgin Australia Holdings board, and may or may not include conversion to equity in certain circumstances,” the airline said in a statement.

The proposed loan package would allow the government to take an ownership stake in Australia’s second-largest airline if it is unable to repay the loan in two to three years. The package is part of a broader request for A$5 billion worth of airline industry aid, said a person with knowledge of the matter, who was not authorized to speak with media.

The proposal was first reported in The Australian newspaper.

Virgin is in a financially weaker position than its larger rival Qantas Airways Ltd (QAN.AX) and has said it would put 8,000 workers on leave and cut more than 1,000 jobs permanently as it grounds the majority of its fleet due to a drop in demand.

“Support will be necessary for this industry if the crisis continues indefinitely, to protect jobs and ensure Australia retains a strong, competitive aviation and tourism sector once the crisis is over,” Virgin said in a statement.

Virgin’s shares are tightly controlled by a group of foreign airlines including Singapore Airlines Ltd (SIAL.SI), Etihad Airways and Chinese conglomerate HNA Group that has also seen a sharp deterioration in revenues due to the coronavirus crisis.

The Australian government has already announced some aid to the airline industry, including refunding and waiving charges such as domestic air traffic control fees worth A$715 million and A$198 million in support for regional aviation.

Deputy Prime Minister Michael McCormack said on Tuesday that he was speaking with airline industry stakeholders and representatives daily to make sure they were receiving the support they needed and listening to what else might be required as the pandemic continues, according to a statement from his office.

Reporting by Jamie Freed; Editing by Cynthia Osterman, Chris Reese and Gerry Doyle

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