The administrators of failed Air Australia have recommended liquidation as "the only realistic option available" and warned that about 500 unsecured creditors will get no return. In the first detailed report to creditors released yesterday, insolvency firm KordaMentha said their preliminary review found that a "significant number" of payments had been made prior to their appointment on February 17 and these might be voided.
"This can be an indication of preferential payments being made to creditors (and) would be reviewed further in a liquidation," the report said.
KordaMentha said it remained unclear if the Brisbane-based carrier had traded while insolvent, engaged in uncommercial transactions or made unfair loans but these issues would also be examined if the group was wound up.
Any money retrieved could flow back to priority creditors, such as the 354 employees.
Creditors are scheduled to hold their second meeting next Friday and will decide whether to liquidate the airline, which collapsed with $84.6 million in debts.
The report said the business had amassed losses of $89 million since the 2010 financial year, when it launched low-cost flights around the country and then expanded to provide service to Bali, Phuket and Honolulu.
It identified the reasons for its failure as inadequate use of aircraft, poor economies of scale, lack of working capital and fare discounting to support cash flow.
While there was "minimal interest" from potential buyers of the airline, KordaMentha said the group's engineering operations had attracted several expressions of interest.
Negotiations with parties who submitted indicative bids kicked off last week and are expected to wrap up by the end of the month, possibly generating a small surplus.
The report also identified a "potential realisation" from the company's operations in Luxembourg which could be as much as $2.6 million.
Another $4.77 million worth of stock such as food, drink and aircraft spares were found on company databases.
The airlines sole owner, Michael James, made a single personal guarantee to the sole secured creditor, ANZ Bank, the report revealed.
ANZ had provided a $20 million facility to the company but the report did not provide any details about James's guarantee.
James has refused to comment on his company's demise. About 4000 passengers were stranded overseas when flights were suddenly grounded.
Air Australia liquidation the only option – beware creditors
