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Virgin still flying Adel-Melb route as administrators move in

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Virgin Australia is continuing to operate six flights a week between Adelaide and Melbourne, as the stricken airline begins the administration process.

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The government-supported flights between Adelaide and Melbourne – three departures and three arrivals a week – are continuing to take place on Mondays, Wednesdays and Fridays.

Virgin filed for voluntary administration on Tuesday after struggling with a high level of debt amid a collapse in air travel during the coronavirus crisis, with accounting firm Deloitte appointed administrator.

An expanded Virgin Australia Lounge was due to open this month, as part of Adelaide Airport’s $165 million expansion.

The first stage of the expansion opened in late February with six retailers opening their new stores including Penfolds Wine Bar and Kitchen, Boost Juice, Lego Kaboom, Airport Pharmacy, Soul Origin, and Precinct Adelaide Kitchen.

An Adelaide Airport spokesman said the new Virgin lounge had been completed, but had not opened due to the current COVID-19 restrictions.

He said the airport would work closely with Virgin Australia and Deloitte through the voluntary administration process.

“We believe it’s vitally important that Australia maintains a competitive and robust domestic market for the benefit of all our customers and the wider aviation industry,” the spokesman said.

Treasurer Josh Frydenberg said the government was not in the business of owning airlines, further dousing calls for the commonwealth to take an equity stake.

“Voluntary administration is a path to the recovery for Virgin. It’s not liquidation. It’s not Ansett. It’s not the end of the airline,” he said.

S&P Global Ratings has lowered its credit rating on Virgin Australia to CC from CCC, saying it expects the company’s unsecured debt providers will be forced to accept less value than they are owed as part of the company’s debt restructuring process.

“If unsecured debt providers are forced to accept less value for amounts owing under their debt facilities, it will constitute a default under our criteria,” S&P said.

But the ratings agency added it expected the company to emerge from the recapitalisation process and continue as Australia’s second-largest domestic airline.

Separately Moody’s said it was reviewing its Caa1 rating on Virgin for a possible downgrade.

“The key issue for existing creditors will be the haircut they are requested to take in a restructure, relative to the risk of putting the company into liquidation with uncertain recovery prospects,” Moodys said.

The ratings agency said the 133-aircraft airline had $3 billion in debt plus another $2.6 billion owed on operating leases on its books for a total debt load of $5.6 billion as of June 30, 2019.

The lack of substitutes for air travel in Australia and the duopoly domestic airline market support its business profile, as does its Velocity frequent flier business, Moodys said.

 – with AAP

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