With Virgin Australia Group entering voluntary administration, many Australians will be wondering what it means for them.
Virgin’s Velocity Frequent Flyer program, which is owned by the group, is a separate company and is not in administration.
So what’s it mean for your Velocity points? What if you’ve got a voucher for a flight that’s just been cancelled?
Let’s get into it.
First things first, Virgin Australia hasn’t collapsed
Yet, at least.
Virgin planes are still in the air, keeping freight corridors open and flying Australians home.
Deloitte administrator Vaughn Strawbridge said the “intention” is to “restructure and re-finance” the business to “bring it out of administration as soon as possible”.
So the doors haven’t suddenly slammed shut. It’s not impossible in the future, but for the moment, this isn’t the end of Virgin Australia.
Bought flights with Virgin? You need to be patient
In a statement, Virgin Australia says your travel credits remain valid.
The managing director of airline intelligence and research, Tony Webber, said there wasn’t much people with travel credit could do right now.
“They just get to hang tight and wait until the administrators have sorted out who gets what and if the airline is a going concern after,” Mr Webber said.
David Flynn, the editor-in-chief of the Executive Traveller website, agrees. He also told ABC News Breakfast that there were a lot of potential outcomes for those with flight credits.
“The issue with that is that if the new owner decides that those travel credits are not worth anything, or if it decides they’re too big a liability, they could just wipe the travel credits,” Mr Flynn said.
“Now, that obviously wouldn’t be good for goodwill, so a new owner might decide to honour those travel credits. It might decide to say, ‘we’ll give you 50 cents in the dollar.’ It might decide to say, ‘You have to spend $1 cash to get $1 travel credit.”
Choice travel expert Jodi Bird says if you’ve bought a flight with Virgin, it’s worth checking if your travel insurance covers travel provider insolvency. Unfortunately, Mr Bird said this wasn’t a common inclusion in policies.
If that’s not an option, Mr Bird said you could investigate processing a credit card chargeback.
If neither of them suit, you’ve just got to wait until Virgin finds a way out, or you become an unsecured creditor in the event it collapses.
If Virgin disappears, which airline will take its place?
Until a new airline can establish itself as a formidable competitor to almighty Qantas, consumers may lose out with higher fares and reduced flight options writes Nassim Khadem.
Got points? It’s a little more complicated
Like we said earlier, Velocity Frequent Flyer is a separate company and is not in administration right now.
But there is a pause on all point redemptions.
According to a statement from Velocity:
- Your points will stay in your account
- Your points won’t expire
- You can keep earning new points
Mr Flynn said the ideal scenario would be that a restructured Virgin emerges and frequent flyer points remain untouched.
“It [Velocity] could be sold off, but it won’t make nearly as much money if it’s sold off to a company that doesn’t have the ability to turn those points into free flights,” he said.
Mr Bird said it made sense that there was a pause on redemptions, because the program was a valuable part of the business for Virgin.
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“In that way, they’re able to preserve what they have in that part of the business and maybe in the future, and again it’s all pure speculation that the administrator is able to sell that business off and restart it again, maybe those points will have some worth again,” he said.
“These are schemes that the airlines essentially set up themselves and they set the rules. So when you’ve got a situation like this where the airline has gone broke, they obviously established the rules around what to do going forward. There’s not a lot the consumer can do about those certain points.”
As for whether you should keep trying to earn points, Mr Bird said the advice from Choice had not changed in light of the news.
“You’re always better off over the long run shopping for value rather than points,” he said.
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Richard Branson Instagram: Dear @virginaustralia team. I am so proud of you and everything we have achieved together. This is not the end of Virgin Australia, but I believe a new beginning. I promise that we will work day and night to turn this into reality
There could still be a Virgin in the future
But it won’t look like the Virgin we know today, Mr Webber said. He said Virgin has had success in the domestic market.
“You can’t say the same for the Tiger business or the international business,” he said.
“It’s [Virgin] not going to look remotely like the airline that was there before, and neither should it. Because if you’ve been running at a loss for a decade, you need to change the way you’re doing things because what you’ve been doing is not working. And we would expect there’d to be material changes to the way it’s doing business.”
Mr Bird said that it was still early days, so it would be up to consumers whether they wanted to hang onto travel credits and points to take a risk on Virgin finding its feet again.
“It is something you have to have a look at and see what’s right for you,” he said.
“It’s all very speculative at this stage. My advice to consumers would be if you can get money back on travel insurance or credit card chargeback, then go down that avenue.”