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  • Virgin Australia (VAH) has requested a trading halt today to assess its financial position and restructure some heavy debt
  • The company’s request for a $1.4 billion government bail-out has so far been met with silence
  • Fears are mounting that the COVID-19 crisis could cause irreversible damage to the company
  • However, Virgin posted a $315 million loss over the 2019 financial year, with shares declining steadily for half a decade before then
  • As such, the company seems to have been in trouble before the pandemic struck
  • Shares last traded for 8.6 cents and are expected to reopen for trade in two days’ time

Virgin Australia (VAH) has frozen the trade of its shares after a request for a $1.4 billion Federal Government bailout appears to have been met with silence.

Shares are locked up tight for at least two days as the nation’s second-largest airline assesses its financial position and restructures its $5 billion debt.

“Virgin Australia requests a trading halt as it continues to consider the issues brought about by the COVID-19 crisis including discussions with respect to financial assistance and restructuring alternatives which are ongoing,” the company said in a letter to the ASX.

Coronavirus crisis

The COVID-19 pandemic has wreaked havoc on the aviation industry in Australia, with fears mounting that Virgin has been struck such a heavy blow it may never recover.

Currently, in a desperate effort to save every last penny, Virgin is operating on a skeleton structure. All international travel has been put on hold, and Virgin currently has one operating domestic flight per day.

This comes after 8000 staff were been stood down — 80 per cent of the company’s workforce.

Further, despite the Federal Government announcing a $715 million rescue package for the aviation industry, Virgin confirmed in late March it requested a further $1.4 billion in assistance — to some scathing remarks from Qantas.

Qantas said the government should not assist companies that have been “badly managed”. But, Qantas said, if the government does grant the $1.4 billion, Qantas would be expecting the same treatment in the name of fairness.

Virgin is mostly foreign-owned, with four major international companies owning roughly 80 per cent of the company.

EAG Investment Holding Company, Singapore Airlines, Nanshan Capital Holdings, and HNA Innovation Ventures (Hong Kong) are Virgin’s four biggest shareholders, each holding roughly 20 per cent of the company.

As such, with the severity of the COVID-19 crisis across the globe, it seems unlikely these foreign owners will come to Virgin’s aid.

As for local assistance, there has so far been no official word from the Government as to whether or not it will chip in to save the company.

Losses before COVID

Virgin was already losing money throughout the 2019 financial year, with shares at a steady decline over the years before.

Virgin reported a $315.4 million loss for the 2019 financial year.

From the start of 2016 to the start of 2020, the airline’s shares declined by over 65 per cent.

Thus, it appears the company’s struggles have been exacerbated by the coronavirus, rather than caused by it.

Nevertheless, the phrase “restructuring alternatives” is significant enough to let speculation run wild.

While some shareholders are predicting the end of Virgin Australia as we know it, others believe some prudent financial management could bring the company back from the brink of death.

For now, investors will need to wait for the announcement later this week to make up their minds.

Shares in Virgin last closed before the Easter long weekend for 8.6 cents each.

VAH by the numbers
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