The subject of the report is the collapse Virgin airlines. Students should focus on two questions:...

The subject of the report is the collapse Virgin airlines. Students should focus on two questions: • What were the main causes of the crisis? • What was the resolution of the crisis?

Expert Solution

Let us first understand the reason behind the Collapse of Virgin Airlines.

Virgin Australia, was running on a balance sheet with excessive levels of debt, which made the business a "High risk" one.

A huge debt positioned coupled with the loss in business due to the Covid-19 pandemic, created a slump in the company's cash flows to the tune of $1.4 Billion.

It was now upto the major shareholders like Etihad, Singapore Airlines and Richard branson, to infuse large amounts of Equity capital to rescue the airline from an impeding collapse.

Let us now understand why Virgin landed up with so much debt.

Virgin started off as a low cost airline, but then later pivoted to become a full-service airline (similar to Qantas), for which it took a debt of $6bn.

Due to this massive debt burden, the airlines had only made a profit once, in the last 10 years of operations, as it paid most of its cash flows to service their msasive $6bn debt obligation

Virgin failed to capture market share despite the massive upgrades they took out, which made their business model unsustainable, and eventually when the Covid -19 crisis hit, the airline went out of business.

The shareholders then looked to the government for a bailout, which did not happen and it resulted in the airlines operations being halted.

What was the resolution of the crisis ??

Evenutally, the creditors of Virgin airline got together, and crafted a deal to sell the airlines to US- based firm Bain capital.

The deal is worth $3.5 Billion, which would see the unsecured creditors being paid ~15 cents on the dollar for their claims on the airline. (Total creditors are owed approximately $7 bn)

The terms of the deal were structured such that, the workforce will be reduced to 6,000 and all "long haul" routes from Australia will be shut down

So all in all, there was some respite for the creditors, but they suffered huge losses on the capital they had lent to the airlines

jeff jeffy answered 2 years ago

Discuss two questions raised by the manager of route strategy of American Airlines: Why should an...

Discuss two questions raised by the manager of route strategy of American Airlines: Why should an airline not be able to establish service anywhere in the world simply by demonstrating that it can be and will comply with the local labor and business laws of the host country? And some airlines such as Southwest and Alaska Air, have survived as niche players without going international or developing alliances with international airlines. Can they continue their strategy?

You are delivering a presentation, and the subject matter concerns whether a company should report convertible...

You are delivering a presentation, and the subject matter concerns whether a company should report convertible debt simply as a liability, or whether embedded features (like the conversion option) in the debt should be separately accounting for as derivatives. Thinking beyond the case facts, list four other considerations you should be prepared to address (such as during Q&A) or background understanding you should gain before presenting.

Hello, i need a 1.5 Pages report about southwest airlines, the paper should discuss 6 ratios...

Hello, i need a 1.5 Pages report about southwest airlines, the paper should discuss 6 ratios of the company, explaining what these numbers are telling us, we are not required to do calculation or show how we solved them, just mention 6 ratios and explain them, and how investors are affected and what information it gave us to improve our business. **the ratios could be found in any general website.

You should aim for a list of 5-10 questions that focus on your thesis area. Thesis...

You should aim for a list of 5-10 questions that focus on your thesis area. Thesis statement: Although there is controversy on the morality and ethic toward living organisms, businesses should be granted patents to modify genes and organisms because it will increase investment, encourage innovation, and foster accountability. Please help me come up with a questionnaire based on the above thesis statement.

. For the questions, your report should include the formulated hypotheses, steps of calculation and formulas,...

. For the questions, your report should include the formulated hypotheses, steps of calculation and formulas, your answers and conclusions, and the results from Excel. A retail company has started a new advertising campaign in order to increase sales. In the past, the mean spending in both the 18–35 and 35+ age groups was at most $70.00. a. Formulate a hypothesis test to determine if the mean spending has statistically increased to more than $70.00. b. After the new advertising...

Weinstein, McDermott, and Roediger (2010) report that students who were given questions to be answered while...

Weinstein, McDermott, and Roediger (2010) report that students who were given questions to be answered while studying new material had better scores when tested on the material compared to students who were simply given an opportunity to reread the material. In a similar study, a group of students from a large psychology class received questions to be answered while studying for the final exam. The overall average for the exam was μ = 73.4, but the n = 16 students...

To answer the following questions, students should use a sum of relevant economic theories (if require)...

To answer the following questions, students should use a sum of relevant economic theories (if require) for the justification of their answers. Students can also use figures (i.e., supply and demand curves) for presenting their answers. Consider the financial crisis 2007-2009 in USA. Now, assume that the crisis has been continuing for 10 years. We call this period as a long run period. 1. Explain the effect of this crisis on USA's GDP in long-run? 2. Explain the effect of...

Intro to statistical inference questions! (I got two exams that I need to focus on, so...

Intro to statistical inference questions! (I got two exams that I need to focus on, so I need help with my homework. Please provide detail if you can, thank you so much!) 1) Give an example of three events E, F, and G so that each pair of events is mutually exclusive. 2) Consider a situation where #(all) = 100, #(E) = 32, #(F) = 52, and #(E ∩ F) = 13. i. Find P(E | F). ii. Calculate #(E...

What Should Google Do Next? A choice between two options: Focus on the company’s core competence,...

What Should Google Do Next? A choice between two options: Focus on the company’s core competence, namely, offering superior search and targeted advertising solutions. or Focus on its core competence AND diversify into new arenas.

Students need to answer case study questions and two following tutorial questions. Answers need to present...

Students need to answer case study questions and two following tutorial questions. Answers need to present in the point form, include 100 to 200 words for each question. What are the key characteristics of a digital business strategy model? Evaluate the range of restructuring options for an existing ‘bricks-and-mortar’ organization to move to ‘bricks-and-clicks’ or ‘clicks-only’ contributing a higher online revenue.

Question