Virgin Australia seeks $863 million government rescue loan

Virgin Australia Holdings Ltd. asked the government for a A$1.4 billion ($863 million) loan to get through the coronavirus crisis.

The airline, which is mostly owned by other foreign carriers, sought the aid as part of a A$5 billion support package it’s seeking for the Australian aviation industry, a spokesman for Virgin Australia said Tuesday.

The loss-making airline has furloughed 80% of its 10,000 staff and is running only essential services. A bailout would equate to indirect assistance to Virgin Australia’s foreign shareholders: HNA Group Co., Nanshan Group, Etihad and Singapore Airlines Ltd. It’s an ownership structure almost unheard of among modern-day airlines.

“The support we’ve proposed will be necessary for the industry if this crisis continues indefinitely,” Virgin Australia said in a statement.

Qantas Airways Ltd., which has also stopped overseas services, has said any financial help from the government should be given to the industry rather than individual entities. The government has so far given aid to the sector — including Qantas, Virgin and regional airlines — valued at about A$1 billion.

According to the Sydney Morning Herald, Qantas has told the Australian government that it, in turn, would expect a A$4.2 billion loan to ensure any industry bailout is proportionate. Qantas’ revenue is about triple that of Virgin.

Virgin Australia is proposing a two- to three-year loan that would convert into equity for the government if not repaid, said a person familiar with the matter, who asked not be identified because the details haven’t been made public.

Mathias Cormann, Australia’s finance minister, told ABC Radio on Tuesday that “it’s not our plan to take a stake in an airline” but said the government aimed to have two viable carriers competing with each other after the crisis.