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Karratha ratepayers could remain half a million dollars out of pocket as Virgin Australia is unable to pay a longstanding debt.
Key points:
- Virgin Australia owes the City of Karratha more than $500,000 in airport fees
- The council hopes to be paid about 10 per cent of the total debt
- The debt comes from unpaid landing fees racked up during 2020 when the company was in a period of voluntary administration
The airline owes the City of Karratha $525,321.38 and mayor Peter Long said the council was unlikely to get a full repayment.
Virgin Australia went into voluntary administration in April 2020 during the first wave of COVID-19 when travel restrictions grounded most planes.
The company owed almost $7 billion to more than 12,000 creditors at the time.
The City of Karratha operates the local airport and the debt was related to charges such as landing fees that went unpaid as the airline hit financial hardship, according to Mr Long.
"The debt we incurred from Virgin was steadily increasing, because they weren't paying the landing fees that we charge them for a long time," he said.
"When the company went into administration, we knew that we'd be in trouble."
The company exited administration later in 2020, with US private equity firm Bain Capital becoming the new owner after a $3.5 billion sale.
Mr Long said the council hoped to get about 10 per cent of what it was owed, but the vast majority of the debt would have to be written off.
He said while the situation was frustrating, many other airport operators had dealt with similar issues and there would be little damage to the council's finances.
"We're looking at only getting a few tens of thousands of dollars, and about a half million dollars we're going to lose," he said.
"We've got roughly $100 million sitting in the bank anyway. That half a million dollars is significant, but it's not a major impact on us."
Mr Long said the issue should be resolved in the next quarter.
Virgin Australia declined to comment and referred questions to Deloitte, which managed the voluntary administration process.
In a statement, a Deloitte spokesperson said closing out a voluntary administration process could be complex.
"In this case, the administrators had to assess several thousand proofs of debt to ensure the right creditors would be paid the right amounts," they said.
"Some creditors objected to the assessment of their claims, leading to a time-consuming legal process that was resolved in the favour of the administrators."
The spokesperson said 99 per cent of creditors had agreed to the arrangement, with an initial payment made last September, and a final payment due by the end of 2023.