TRANSCRIPT: NEWS DAY ON SKY NEWS INTERVIEW, 24 April 2020

E&OE

Subjects: Virgin Australia;

TOM CONNELL

Let's get more on the future of Virgin Australia with the Deputy Prime Minister Michael McCormack.  Thanks very much for your time.  I know it's a busy period at the moment.  Let's just begin with Virgin Australia.  So it's now in administration.  From here, if a buyer can't be found, if some sort of arrangement can't be managed, it does go into liquidation.  Would the Government allow that to happen?

MICHAEL MCCORMACK

I'm hopeful that a buyer will be found and with a number of buyers potentially circling, we've heard reports of up to ten very good prospects this week, Tom and you know, that could even be more, it would be more in weeks and perhaps the next couple of months.  So we'll just see how it plays out. 

This is Virgin's strongest chance of making sure that they come out of COVID-19 in the best possible position for their company and perhaps, most importantly, for competition in the airways and the 10,000 people they employ and the 6,000 suppliers that engage their services with what has been a great airline. 

TOM CONNELL

I mean, look, a lot of people are hoping for the outcome you spoke about.  You must, though, be wargaming the possibility that doesn't work out.  So what will the Government do if that's the case?

MICHAEL MCCORMACK

Well, we're very hopeful and confident, as is Virgin's CEO Paul Scurrah.  He said, when they announced the voluntary administration arrangements, that he felt this was the best possible way that Virgin could recapitalise and restructure their business.  They were always going to have to look at what they were doing with their business, given the fact that they came into COVID-19 with a $5 billion debt.  That was always heavy lead in their saddlebags, but now this has occurred, in VA, they can look at how they're doing their business, how they're doing their operations.  They've got Deloitte running the ruler over their books and certainly, I know Nicholas Moore will report back to Treasury and through Treasury, the Government will get a good handle of where the situation is and I'm confident that at the end of this, hopefully not too far away, we'll still continue to have two commercially viable airlines. 

TOM CONNELL

Let me ask it this way then, do you have a plan if a buyer can't be found?

MICHAEL MCCORMACK

Well, let's see what happens. Again, I say, Tom, we are confident that this process is going to work. 

TOM CONNELL

There must be a plan because it's two to three months away, that at that stage there's a possibility they say sorry, the numbers aren't adding up, into liquidation.  Surely you've got a plan if that's going to happen?

MICHAEL MCCORMACK

Well, the Government's building Western Sydney Nancy-Bird Walton International Airport.  We're spending $5.3 billion there.  There are new runways going into Brisbane and Melbourne.  We don't want to build all this infrastructure and see all this infrastructure being built without two commercially viable airlines.  And we want that to happen.  We need the competition for that to happen.  Of course, the ACCC will continue to monitor airfares. 

This is important for Australia, it's important certainly for regional Australia.  That's why we've put on the table $1.28 billion to help the aviation sector, making sure that we've got those international repatriation flights, a domestic network, regional air services. We've put a lot of money on the table, we'll continue to monitor it closely through Nicholas Moore's advice and I'm confident that we'll come out the other side with two commercially viable airlines. 

TOM CONNELL

So with that, two commercially viable airlines, in terms of a plan B, again, you have to plan for the worst in Government, hope for the best.  How long would it take to get another player in if Virgin Australia didn't work out? What sort of timeframe would we be looking at?

MICHAEL MCCORMACK

That will be a matter for those prospective players.  I know Virgin has a good model.  I know that they will be looking at what they can do to make it even more viable.  They will be looking to refinance.  It depends who comes in, Tom.  It depends on how much money they want to put on the table.  It depends on the structure that they take.  Indeed, it's still not out of the question that their own shareholders could reinvest and that would be a good thing, too, a good sign that they are confident that the airline has the success and has a future plan for Australia.

TOM CONNELL

But if at the end of the sort of, two to three months goes by and we're looking at a liquidation situation, what would be the gap there?  How long might we only have one airline in Australia?

MICHAEL MCCORMACK

Well, let's hope that doesn't happen and we will, of course, revisit that at that time, Tom. I don't want to get into hypotheticals.  Virgin are now in the best …

TOM CONNELL

But you have to have a plan ahead of time, wouldn't you, before that –

MICHAEL MCCORMACK

Of course we'll discuss it as the Government, at the cabinet level and of course we'll look at those things, if and when they occur. 

TOM CONNELL

And on whatever sort of shape, you spoke about restructuring of Virgin Australia and so on, if it in effect, becomes a budget carrier at the end of that process, is that an acceptable outcome?

MICHAEL MCCORMACK

Well, they were always going to have a look at their business and what they were doing because, as I said before, they were saddled with $5 billion of debt.  You can't sustain those sorts of operations [inaudible], profitability. That's hard and that can't be sustained.  So they were always going to have to look at that.  CEO Paul Scurrah knew that and he knew that they were going to have to relook at their business.  He knew they were going to have to refinance.  They've got the opportunity to now do that.  They've got the best people placed to do it and I'm sure that they can come out the other side bigger and stronger as Paul Scurrah says.

TOM CONNELL

I mean if it goes back to more of a sort of Virgin Blue model, that would be fair enough?  The Government would say well we've got a second major airline servicing the cities, that's the sort of minimum outcome?  You wouldn't intervene at that point?

MICHAEL MCCORMACK

I suppose they're always going to have to look at their routes and their services and what they provide and their whole business model.  I would sooner see a model where we had two commercially viable airlines than just the one, Tom. 

TOM CONNELL

And just finally on frequent-flyer points, the understanding is they will be intact.  What about Australians that have booked flights and they've been given refunds not in cash but to use on flights.  What's your understanding on how that money, we could be talking about hundreds of millions of dollars, will be treated by the administrator?

MICHAEL MCCORMACK

Well, I'm very much hoping that they are going to be honoured.  I'm very much hoping that that will be a situation where those points will still be able to be redeemed, that situation with the flights will still be honoured.  That's important for those people because at the end of the day they've shelled out their money, they expect something in return and I think it's up to the company, the administrators and potential buyers to honour those flights and those conditions. 

TOM CONNELL

The Government has an intermediary in this process so will that be part of what they're pushing for? Because, generally consumers could be considered unsecured creditors and effectively left on the hook.  Are you saying the Government would push for a different –

MICHAEL MCCORMACK

I'm sure the ACCC and various consumer rights organisations would certainly have a say in that.  We want to make sure that the Virgin that comes out of this voluntary administration is the best possible airline and providing the best possible services for Australian consumers.  Australian consumers who have supported this airline for a number of years, Australian consumers who have done the right thing and for obviously those 10,000 workers who proudly put on that red uniform and go to work every day.  We want the best possible outcomes for them. 

We'll certainly monitor the situation closely.  Nicholas Moore will provide that advice to Treasury and we'll certainly continue to have those discussions and to make sure we do get a second airline operating in Australia for those regional routes, those capital city routes that they've done so well for so many years. 

TOM CONNELL

Deputy Prime Minister Michael McCormack, appreciate your time. 

MICHAEL MCCORMACK

Any time at all.

Shane Manning