Tourism and hospitality sectors react to Virgin Australia’s big news

While it wasn’t necessarily a shock when Virgin Australia announced yesterday morning it had entered into voluntary administration, the move has still prompted responses from key figures within Australia’s tourism and hospitality sectors.

Simon Westaway, executive director of the Australian Tourism Industry Council, said Virgin’s shift into voluntary administration represents a further significant challenge for Australian tourism.

“This is also a historic but also difficult moment for Australian aviation and for thousands of airline personnel and many associated businesses that will be severely impacted. Those obviously also include in tourism,” he said.

“These are the most challenging of times. The uncertainty around what level of future lost volume of flights and seat capacity that came from a second airline group is obvious in its negative impact.

“The year is, however, no longer 2001 when Ansett first fell. Before the COVID-19 pandemic, Australia’s skies were statistically and arguably never busier, including record levels of domestic and international air travellers and tourism visitors.

“Australian airlines strongly competed within this environment. The future for our aviation market cannot be overly speculated as lacking opportunity.

Westaway said Australian tourism is best delivered in terms of its optimum performance, economic outputs and supporting one million direct local jobs and hundreds of thousands of tourism businesses when the nation’s aviation market continues to foster these outcomes domestically, regionally and internationally.

“It is logical and important that our Australian-based airlines maintain sustainable operations in order to help achieve this,” he said.

“It is also important that we oversee operating and regulatory conditions to ensure a strong sustainable and competitive Qantas Group into the future.

“This creates opportunity for whatever the future structure of Virgin Australia may ultimately become or for any future prospective Australian-based airline entrant that may emerge.

“Australian tourism and our greater visitor economy need ongoing support. That argument is only made even louder today.”

Tourism Accommodation Australia has warned the loss of one of Australia’s two national airlines would be a disaster for an already struggling hotel accommodation sector, particularly in regional areas.

The CEO of the nation’s top tourism accommodation body, Michael Johnson, said domestic tourism would be the quickest road to recovery post-COVID-19 and the two national airlines would be needed.

“Initially, as we eventually move out of the COVID-19 crisis, the hotel sector will be heavily reliant on domestic tourism, with international borders expected to be closed for many months,” Johnson said.

“There are very real fears an airline monopoly would take away the competitive edge needed to ensure corporate, conference and leisure guests are well catered for in our key recovery markets.

“Accommodation hotels in regional destinations in particular, such as Cairns, are heavily reliant on both Virgin and Qantas and the existing competition between both. The last thing they need is for a national carrier to collapse.

“All accommodation hotels have been hard hit by the impacts of COVID-19 with in excess of 300 closing across Australia in the last few weeks alone.

“We need to do all we can to ensure we don’t take another hit with a loss of a national airline like Virgin.”

Suitors line up

Virgin has appointed Deloitte to help restructure its $5 billion debt pile and recapitalise the business.

Deloitte’s Vaughan Strawbridge said the intention of the administrators is to bring the company out of administration as soon as possible.

“We are committed to working with Paul [Scurrah] and the Virgin Australia team, and are progressing well on some immediate steps,” he said.

“We have recommended a process of seeking interest from parties for participation in the recapitalisation of the business and its future, and there have been several expressions of interest so far.”

According to media reports, there are more than 10 interested parties in Virgin Australia, including BGH Capital, Indigo Partners, Oaktree Capital, and entrepreneur Richard Branson.

The airline noted that its frequent flyer program, Velocity, is not in administration, as it is a separate company. However, Velocity has frozen point redemption for members or at least four weeks.