Refunds to passengers of Air Australia likely to “be nil”

There are fears some passengers will never get their money back after the revelation collapsed budget airline Air Australia owes creditors up to $90 million.

Refunds to passengers of Air Australia likely to “be nil”

There are fears some passengers will never get their money back after the revelation collapsed budget airline Air Australia owes creditors up to $90 million.

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The grounding of the airline earlier this month left 4000 people left stranded in Hawaii, Phuket and Bali and another 100,000 who bought tickets appear to be at the back of the creditor’s queue.

Approximately 50,000 passengers have applied for refunds through various means so far, a KordaMentha spokesperson said.

The remaining 50,000 or so have not yet applied for refunds or have already received them.

Passengers who used a travel agent to book their trip may or may not be able to get a refund, depending on the relationship with the agent, while those who paid for their flight with cash are “not so well off”.

Those who paid via credit card will be able to get their money back from the banks.

Administrators for the airline met about 100 creditors at The Greek Club in Brisbane today.

The meeting heard a Federal Government scheme would cover some of the 300-plus employees’ unpaid wages, but limited payouts to $118,000.

Only $5 million of the $8 million owed in unpaid wages would be paid by the scheme.

Mark Korda, a partner at administrator KordaMentha, said the return to creditors was likely to “be nil”.

“Our prognosis is the airline is not saleable, but we have had four expressions of interest for the sale of the engineer business,” Mr Korda said.

“Because the company leases its buildings, leases its planes, leases its equipment, you don’t have a lot of assets.

“There’s not a lot to sell.”

He said $1 million could be made from the assets with some possible returns from superannuation.

ANZ, the biggest creditor, was owed more than $20 million while other creditors included aeroplane lessors, catering companies, cargo companies, spare-parts suppliers and maintenance companies.

Air Australia founder and chief executive Michael James, who has gone to ground since the collapse, did not attend the meeting.

Mr Korda told creditors the company would most likely go into liquidation.

Air Australia was previously known as Strategic Airlines but relaunched in November 2011 to cash in on under-serviced routes.

“I think their strategy was to start up a low-cost airline and in my experience that is a very difficult undertaking,” Mr Korda said.

Thousands of passengers were stranded when the airline collapsed this month.

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