Virgin Australia’s future: Key meeting on 4 September
Fine print about Future Flight credits revealed.
The final creditors meeting has been set to vote on the proposed buyout of Virgin Australia by Bain Capital. If that goes ahead, existing Virgin tickets should be honoured, but beware of the fine print.
The second creditors meeting will happen on Friday 4 September 2020. If the Bain deal goes through, unsecured creditors will receive between 9 and 13 cents in the dollar, while existing VHA shares will effectively become valueless, as the business ownership will be transferred entirely to Bain.
Deloitte, which is running Virgin's administration process, argues that it's the best possible outcome for the troubled airline. Creditors might choose to reject the buyout offer, but in that case, the future of the business seems in grave doubt, with much less likelihood that existing credits will be honoured or that any employees will keep their jobs. An alternative buyout deal from two bondholders was effectively ditched last week.
Deloitte's assessment is that the only alternative to Bain's offer would be to wind the business down entirely, with no creditors receiving anything.
"We have set out our opinion to creditors that it is in their interest to approve the deed of company arrangement proposed by Bain Capital as it provides for the best return to creditors in what are extraordinary circumstances, and that were impossible to foresee," Deloitte's joint voluntary administrator Vaughan Strawbridge said.
"This will provide certainty for the business under new and committed owners. It provides certainty for employees and customers, a return to creditors, and it can be completed sooner, and at less cost than other alternatives."
Looking through the creditor's report, I did see one interesting piece of information around credits for travellers I hadn't noticed previously.
A key selling point for the deal for Virgin Australia customers has been that existing credits from flight bookings will be turned into "Future Flight" credits which can be used to book Virgin flights. Here's what the report says about the rules (emphasis mine):
Future Flight credits will be available for booking flights up to 31 July 2022 with travel valid until 30 June 2023. Bookings using your credit will be subject to seat availability within the fare class reserved for Future Flight credits on your selected flight and will be subject to its own terms and conditions.
In other words, you can't just use your credit to book whatever flight you like. If all the seats assigned for Future Flight are taken, you won't have that option.
We'll have to wait to see if the deal goes through to find out what that means in practice. But a scenario similar to rewards seats seems likely: you might have trouble using your credit to book business class seats, or to travel during peak periods.
Virgin Australia has already said that Velocity Points balances will be honoured. Again, we'll have to wait to see if the deal goes through to get details on any changes to what points are worth. I'll be keeping a close eye on that!
Picture: Angus Kidman