Passengers stranded as Air Australia goes bust

Thousands of Australian travellers have been left without a flight in or out of the country as troubled budget airline Air Australia dived into administration today.

And the now-failed airline has sold about 100,000 tickets for future flights that are unlikely ever to take off.

Image: Placed into administration ... Air Australia. Photo: Phillip Thomson

Matt O'Sullivan's analysis: Customers jettisoned again

There was also chaos at Phuket airport today as passengers queued to try to get on alternative flights, crammed internet cafes and waited outside the offices of Air Australia's local agent for an explanation.

Many passengers were paying more than $1000 for flights to Singapore.

Image: Michael James.

Amy Simpson, 24, of of Werribee in Victoria said it was "absolute chaos" as 300 passengers on a scheduled flight to Melbourne were stranded last night.

"The plane was due out at 7.30pm and we were told at first about 6.30pm that it would be delayed until 8pm due to minor difficulties," Ms Simpson told the Phuketwan, an online news portal on Phuket.

"Every hour or so there were further delays," she said.

Image: Director of Air Australia, Michael James, was not answering the door to his $1.25 million house in Brisbane's east this morning. Photo: Bridie Jabour

"Eventually close to midnight we were told we would not be flying."

Ms Simpson said she and a friend who had been travelling in Asia were lucky because they managed to get on a flight to Singapore today.

‘‘Lots of people are struggling," she said.

Image: Bewildered passengers wait in vain to board their flight at Phuket. Photo: Yves Makhoul.

Some passengers spent the night sleeping at the airport.

Most of the airline's 300 staff have been stood down as about 4000 passengers are left to search for alternative flights on their own as administrators probe the possibility that the company was trading while insolvent.

At least two international flights bound for Melbourne - from Phuket and Honolulu - were grounded after they were refused fuel.

Five domestic flights between Brisbane to Melbourne today have also been cancelled.

Administrators KordaMentha directed stranded passengers to contact other airlines immediately to try to reschedule their flights. Phuket is packed with visitors at the moment - the height of the tourist season.

"It currently appears that there are no funds available to meet operational expenses so flights will be suspended immediately," KordaMentha said in a statement on the airline's website.

"For clarity, it also appears highly unlikely there will be any flights in the short to medium term."

KordaMentha founder Mark Korda said there were about 4000 passengers whose flights would be grounded today as a result of the airline's collapse.

He said most of the airline's 300 staff had been stood down, effective immediately.

Mr Korda said flights were suspended at 1.30am after the company was unable to pay for fuel for a Melbourne-bound flight departing from Phuket.

"Late last night, the airline was unable to have an aircraft in Phuket refuelled," he said.

"They owed the supplier of fuel money, and needed to buy fuel, so the supplier would not supply fuel."

He said it was possible this meant the aircraft was being held at Phuket airport until the airline was able to pay its bills.

"It's likely there would be charges outstanding to [Phuket] airport but I don't have that information."

Mr Korda could not rule out whether or not the airline was trading while insolvent - or taking bookings and conducting business when management was aware the company was going under.

"It's part of our duty to do an investigation into that," he said.

Gillard appeals to administrators

Prime Minister Julia Gillard has called on Air Australia administrators to do everything they can to make sure stranded Australians get home.

"My immediate concern today is not only for the working people caught up in this circumstance but also the passengers," she told reporters in Canberra this afternoon.

Ms Gillard would not say whether or not the government was considering providing chartered aircraft to fly stranded passengers home.

She praised Qantas and Jetstar for "stepping in and stepping up" with additional seats but added that this didn't mean administrators should "down tools".

Ms Gillard also endorsed a move by Workplace Relations Minister Bill Shorten to refer reports of Air Australia workers being paid $90 a day to the Fair Work Ombudsman.

Director yet to comment

The director of Air Australia, Michael James, was this morning not answering the door at his $1.25 million house in Birkdale, in Brisbane's east.

He is yet to comment on the company going into voluntary administration.

The Brisbane-based carrier was previously known as Strategic Airlines and relaunched under the Air Australia banner in November 2011. It ran flights on domestic routes and to Bali, Honolulu and Phuket.

A push to reinvent the airline as a "boutique carrier" failed and statements lodged with the financial regulator a year ago show it was under pressure. It is owned by Strategic Aviation Group.

In 2010, Strategic's charter arm lost a $30 million-a-year Defence Department contract to carry Australian troops and military cargo to Kuwait and the United Arab Emirates.

Mr James, a 35-year-old former Ansett employee, became the group's sole shareholder last February after Melbourne businessman Shaun Aisen severed his ties with both the commercial airline and charter business.

Qantas offers help

Today, Qantas chief executive Alan Joyce - who yesterday announced 500 jobs would go as part of a review of his company's operations - offered to try to help stuck travellers.

"Jetstar is looking at adding supplementary services to help those passengers," Mr Joyce told the Seven Network. He said Qantas would also try to run extra flights.

"If the [Air Australia] passengers come to a Qantas desk, a Jestar desk, show their ticket, we'll give them a ticket for the same value they've paid with Air Australia, so they don't have to pay any more and they can try and recover that fare from their travel agencies or their credit card suppliers," he said.

That came as Hawaiian Airlines offered one-way, $300 rescue fares for Air Australia ticket-holders on Sydney-Honolulu flights until March 1.

And discounts website Scoopon, which sold more than 2000 tickets for travel on the Melbourne-Phuket route, has sent a customer services representative to the Thai airport to assist stranded passengers. It has also set up a help page.

KordaMentha said passengers who bought tickets on a credit card, or those with travel insurance that covered insolvency, should be able to get their money back.

A Melbourne Airport spokeswoman said a Honolulu flight due to arrive in Melbourne at 5.25pm had also been grounded.

"All Air Australia flights have been cancelled," the spokeswoman said.

In a statement on its website, the company says the director of the Air Australia group of companies appointed John Park and Mr Korda of KordaMentha as voluntary administrators today.

Mr Korda told 3AW he had been monitoring the situation last night when there were troubles with supplier fuel.

He said that he would know after the weekend what state the airline was in.

Mr Korda oversaw Australia's largest ever administration - of Ansett airlines - with partner Mark Mentha.

Hundreds of passengers were stranded for days on Phuket last year after a mechanical failure on one of the company's planes.

Cancelled flights

Domestic
Melbourne to Brisbane (11.20am, 5.45pm)
Brisbane to Melbourne (9.40am, 10.40am, 5pm)

International
Melbourne to Phuket (11.25am)
Melbourne to Honolulu (7pm)
Phuket to Melbourne (8.25am)
Honolulu to Melbourne (5.25am)

- with AAP, Lindsay Murdoch and Judith Ireland

Do you know more? Are you stranded or know someone who is? Contact the Age here

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