Virgin Australia set to be sold to Boston-based Bain Capital by August for an undisclosed sum. Image by Dan Himbrechts/AAP PHOTOS

air transport

‘Great day’ as Virgin Aust sold to Bain

2020-06-26 14:55:12

A slimmed-down Virgin Australia could resume flying again in months after its administrators agreed to sell the ailing airline to Boston-based private equity firm Bain Capital.

Purchase terms were not disclosed but Deloitte does not expect any return to shareholders in the deal, which is set to be completed by the end of August.

Bain’s Australian managing director, Mike Murphy, told the Australian Financial Review that Virgin would have around 5,000 to 6,000 employees and 60 or 70 planes when it resumes flying in September.

The airline had 10,000 employees and was flying 79 Boeing 737s and another 11 wide-body aircraft to 41 destinations when it entered voluntary administration on April 20, becoming the highest-profile aviation victim of the coronavirus pandemic in the Asia Pacific.

“The fleet will be focused on 737s – the narrow bodies – and obviously in the near term the domestic routes, in particular starting with the triangle (Sydney, Melbourne and Brisbane), will be the core focus,” Mr Murphy was quoted in the AFR.

Virgin Australia chief executive Paul Scurrah, who has been working with Bain on the deal, called it a “great day for Virgin Australia and a huge milestone”.

“Bain’s investment will cement our future as a major Australian carrier, secure thousands of direct and indirect jobs, and ensure we can continue to bring competition to millions of customers for many years to come.”

Australian Council of Trade Unions president Michele O’Neil said Deloitte had advised the unions that represent Virgin employees that the deal was the best possible one under the circumstances.

“We understand that the agreement provides 100 per cent protection of employee entitlements but will result in the loss of jobs to some of Virgin Australia’s hardworking and skilled employees,” she said in a statement.

Deloitte said the transaction will carry forward all Velocity frequent flyer-booked flights, honours all employee entitlements, and supports the current management team led by Mr Scurrah.

Deloitte said it couldn’t yet estimate what return Virgin’s creditors, who are owed around $7 billion, would receive from the sale.

The deal will need to be approved by 50 per cent of creditors by value and 50 per cent by number to be finalised.

Many contracts with suppliers and aircraft lessors must be renegotiated before the return to creditors can be finalised, a source with knowledge of the matter told Reuters.  

Cyrus Capital Partners, the other preferred bidder left in the running, pulled out of bidding earlier on Friday, saying Deloitte had not returned phone calls.  

The news comes a day after Virgin’s larger rival Qantas announced it would shed 20 per cent of its staff and keep another 15000 stood down for an extended period to deal with reduced travel activity. 

Qantas is also raising $1.9 billion to bolster its balance sheet from the shock of the coronavirus crisis.

– with Reuters