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67 days from engagement to success
An airline that could see no way out, got a new beginning
When this airline ran into trouble, it was a matter of national importance. Here is a case study showcasing the collaborative journey to a clear path for the future and the International Business Turnaround of the Year (2021).
When this airline ran into trouble, it was a matter of national importance. A competitive aviation sector is vital for a strong economy and significant parts of Australia’s tourism and hospitality sectors relied upon it. The business was burdened by a legacy of high debt, a high cost base and an ill-conceived strategy to move from a low-cost carrier to a full-service airline. In April 2020, Deloitte was appointed the administrator of the airline as the growing economic toll of COVID-19 on the travel sector was accelerating, and the airline had a sudden 95% drop in revenue. There were 1.6 million creditors with a debt burden of AUD7 Billion – many of whom were customers with pre-paid tickets, together with over 10,000 employees who needed to be protected. In order to avoid liquidation of the airline, the Deloitte administrators decided to trade the business and commence a (very) accelerated sale process. The Deloitte team was focused on saving the airline and avoiding a liquidation to provide the best outcome to key stakeholders including financiers, trade creditors, investors and employees alike.
When a company is in financial distress, the right advice is critical. Deloitte’s Turnaround & Restructuring team works with boards, management teams, banks, investors, government agencies and other stakeholders to help organizations navigate complex challenges and rapidly achieve improvement in distressed situations.
Deloitte and the airline’s management worked around the clock on a restructure to rescue the business. The restructure simplified and reduced the cost base to attract a new owner. The Deloitte team actioned a number of initiatives to significantly reduce costs including streamlining the fleet from nine aircraft types to two, reducing the property leasing footprint (including moving the head office), and renegotiating supplier contracts.
In a record 67 days from date of appointment, the business was successfully sold to a private equity firm. This is a great example of how the voluntary administration process can be used to successfully save a business and more importantly preserve jobs for the thousands of employees. This was incredibly rewarding for our team given the national significance of the airline and the number of jobs saved by the restructure.