20 buyers now circling Virgin Australia
Wow Blackout, that’s such an informed and useless post! Bain has also already said they’re injecting money as soon as next week, so your 2nd last post is as useful as your most recent post! 2 for 2! Going for the hat-trick?
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Sure, once and once only they’ll inform the creditors how much they’ll be screwed and that’s it. Venture Capitalists owning private companies aren’t in the business of informing the competition what their plans are through a market they aren’t part of.
VA 1.0 made noises about reverting to a private company partly to avoid the responsibility of disclosure.
Seriously, Bain and similar organisations are not “Investors” in the sense of benign Superannuation funds with “ patient capital” planting acorns and waiting for them to grow into mighty oaks.
They are more like, perhaps unkindly, serial killers investing in more rope, handcuffs and ammunition. By the time Bain have finished Virgins suppliers, staff, the government, the industry and perhaps the general public will wish they would go away. They are not warm, cuddly people.
To put that another way, these guys will make the private owners of Sydney and Melbourne Airports look like amateurs when it comes to extracting money from Australians.
”Triple bottom line?” Ho ho! Ha ha!
They are more like, perhaps unkindly, serial killers investing in more rope, handcuffs and ammunition. By the time Bain have finished Virgins suppliers, staff, the government, the industry and perhaps the general public will wish they would go away. They are not warm, cuddly people.
To put that another way, these guys will make the private owners of Sydney and Melbourne Airports look like amateurs when it comes to extracting money from Australians.
”Triple bottom line?” Ho ho! Ha ha!
Well as far as I can tell, VA are in desperate need of some cut throat behaviour. If the travelling public don’t agree they’re always free to fly with the rat (or rex perhaps!?)
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Unless the nature of the deal between Bain and Deloittes is leaked, it's all guesswork. My understanding is that this plan is a commitment to buy at a price, not a guaranteed contract of sale ("Sale and Implementation Deed").
Under this plan, the return to shareholders is zero and the "cents in the dollar" return to creditors is as yet unknown. It's also strange that interim funding until the second creditors meeting has not been clarified in the letter from the administrators. Bain won't part with a cent unless a firm contract is in place, and that can't happen unless the creditors agree.
My bet is that Bain's offer barely covers all staff debts, a minimal return for the remaining creditors and a requirement that all awards, EBAs etc are null and void. Comes back to the VCs wanting "something for nothing", particularly the existing AOC.
The problem is that the creditors are now between a rock and a hard place and have to compare the option of a fire sale and liquidation versus the option of a minimal return in the dollar from Bain. Either result means a huge haircut for them. The bigger picture would suggest the second option would be much more palatable with the company continuing to trade in a smaller capacity, but with the debt removed.
Bain will be capably assisted by Carla, if they do get the nod. Difficult to see PS hanging around under this scenario.
Under this plan, the return to shareholders is zero and the "cents in the dollar" return to creditors is as yet unknown. It's also strange that interim funding until the second creditors meeting has not been clarified in the letter from the administrators. Bain won't part with a cent unless a firm contract is in place, and that can't happen unless the creditors agree.
My bet is that Bain's offer barely covers all staff debts, a minimal return for the remaining creditors and a requirement that all awards, EBAs etc are null and void. Comes back to the VCs wanting "something for nothing", particularly the existing AOC.
The problem is that the creditors are now between a rock and a hard place and have to compare the option of a fire sale and liquidation versus the option of a minimal return in the dollar from Bain. Either result means a huge haircut for them. The bigger picture would suggest the second option would be much more palatable with the company continuing to trade in a smaller capacity, but with the debt removed.
Bain will be capably assisted by Carla, if they do get the nod. Difficult to see PS hanging around under this scenario.
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This is worth quoting in full from the AFR yesterday:
"Virgin Australia could break even by February, according to Mike Murphy, the former Olympic diver who led Bain Capital's successful $1 billion-plus bid for Australia's second national carrier.
Murphy provided details of Bain's strategy for Virgin in an exclusive interview with The Australian Financial Review on Friday.
Former Olympic diver Mike Murphy says the Virgin deal is the second most complicated in Bain Capital's 36-year history. David Rowe
He says Virgin Mark II will have about 5000 to 6000 employees and 60 or 70 planes operating when it resumes operations in September. Its head office will stay in Brisbane as part of an agreement with Queensland Investment Corporation.
Murphy describes the new-look Virgin as being positioned similarly to where it is now but with less emphasis on servicing the elite who use business club lounges.
"I think largely the positioning from a customer perspective will be very similar to where it is, but maybe a little more value focused," he says.
"We interviewed six or seven thousand customers over the past couple of months to figure out what they really care about," he says.
"You know, aside from the table stakes of safety, obviously price and scheduling, convenience are No. 1 and No. 2 by a country mile.
"Things like a fancy club and fancy meals and all of that are relevant to a very small portion of customers.
"But for the vast majority of customers, they just don't value that as much. We will work with Paul [Scurrah] and his team to put a finer point on this."
When Murphy mentions fancy clubs he is referring to the strategy of former Virgin CEO, John Borghetti, who rolled out special Virgin clubs at airports in Sydney, Melbourne, Brisbane, Perth and Canberra. There are 4000 Velocity members entitled to use them.
Murphy says his immediate objective will be to "try and stand the business back up as fast as possible and as big as possible".
"But it's got to be linked to customer demand – that really decides everything in terms of the fleet size and the size of employment. It just has to be led by how fast all the bookings come back."
Murphy said the more employees Virgin could employ the better it would be for all concerned.
"It's important to get the balance right," he said. "I mean, as you just saw with the Qantas announcements, coming out of the gate with too many planes and too much cost, just compromises the future of the whole business.
It would be disingenuous for us to promise everybody that they're going to have their job for life – it's just not a reality.
— Mike Murphy, Bain Capital
"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.
"But over time, international short haul will come back first and then long haul. I think we'll be pretty careful with which routes we keep and which we can't. The Hong Kong route, for example, has been an incredibly loss-making route for the business and just does not make sense to continue."
"It will be a mix of Virgin's own planes and a combination with partners like Alliance that will make sure we retain original coverage."
Murphy expressed confidence that Bain could work with Virgin's unions.
"The union dynamic is obviously important. Over the past couple of weeks, I've had a lot of very constructive conversations with the likes of Michael Kaine [TWU] in particular, who I think is really the thought leader of the entire group along with Michele O'Neil at the ACTU.
"I just think the dynamic is not one where someone's got leverage and someone doesn't have leverage. I think we're just looking at what's the most constructive approach we can take to saving as many jobs as possible on the best terms that are possible, that actually provides for a sustainable business in the long term."
Murphy says there has been no hostility between Bain and the unions apart from Steve Purvinas, the federal secretary of the Australian Licensed Aircraft Engineers' Association.
It would seem to Chanticleer that Purvinas was dumb to pick a horse in a two-horse race when he knew he had to work with the winner irrespective of his crystal-ball-gazing ability.
But Purvinas tells Chanticleer he is happy with Bain's Victory.
"I won’t have a problem dealing with Bain, they know I am not a fence-sitter," he says.
"They also have to appease me if they want concessions in the engineers' EA. By coming out and picking a side, it forced Bain to increase job numbers substantially and ended the idea of JH [Jayne Hrdlicka] being CEO. I am pleased with the result."
Murphy says the present management of Virgin led by Scurrah had already been talking to the unions about changing various enterprise bargaining agreements [EBA] and talks would continue under Bain.
He says several EBAs have expired and regardless of the deal need to be dealt with.
"I would expect there'll be a revisiting of all of those [EBAs], but it'll be in the fullness of time," he says.
"We don't want to rush it at all. So it's not the case that we would try to jam a full negotiation to be done by the second creditors' meeting.
"We want to basically work with the unions and lay out together a timetable and a consultation approach that works for them, works for us. If that means it's multiple months, that's fine."
Murphy says he is looking forward to working with Scurrah.
"We're a performance-based culture and he has a performance-based philosophy as well. We're behind him and his team and if everything goes well and everything's great that would be nice.
"One thing we were worried about over the past couple weeks is that it would be disingenuous for us to promise everybody that they're going to have their job for life – it's just not a reality for me or for anybody. It's all about delivering on the plan."
Murphy says the work done by Bain as part of its due diligence and preparation of its bid was the second most comprehensive and complex undertaken by the firm in its 36-year history.
The only deal more complex was a transaction in Japan several years ago with Toshiba Corporation.
Bain's team working on the Virgin deal includes 15 people from private equity and credit split between New York, Boston, Hong Kong and Sydney. Also, there were many external advisers.
"It's a multimillion-dollar adviser bill," he says. "I think we had about 60 external advisers across PwC, KordaMentha, Freehills, Goldman Sachs and a couple of other specialist advisers."
"I think the administrators would have got a lot of confidence by the detailed work that we've done – bottom up issue-by-issue, the analysis and the detail," he says.
"Of course, for them, it's really important that the person who takes this asset is going to be stable, has done their work, has gotten funding and follow-on funding, which is necessary to make sure the business survives into the future."
Murphy makes a compelling argument in favour of extending the federal government's JobKeeper payments for aviation workers for another six months beyond September this year.
"What I would say, and I have been saying this to the unions as well, a thousand redundancies at Virgin will cost $50 million dollars," he says.
Murphy says it would be "crazy" to put people through the emotional turmoil of redundancy only to have to hire them back later if customer activity picks up.
"We've been pushing for this for the sector, not just for Virgin but for Qantas and others."
Murphy's argument in favour of extending JobKeeper for the aviation sector was helped by this week's announcement from Qantas that it would sack 6000 people.
Murphy provided details of Bain's strategy for Virgin in an exclusive interview with The Australian Financial Review on Friday.
Former Olympic diver Mike Murphy says the Virgin deal is the second most complicated in Bain Capital's 36-year history. David RoweHe says Virgin Mark II will have about 5000 to 6000 employees and 60 or 70 planes operating when it resumes operations in September. Its head office will stay in Brisbane as part of an agreement with Queensland Investment Corporation.
Murphy describes the new-look Virgin as being positioned similarly to where it is now but with less emphasis on servicing the elite who use business club lounges.
"I think largely the positioning from a customer perspective will be very similar to where it is, but maybe a little more value focused," he says.
"We interviewed six or seven thousand customers over the past couple of months to figure out what they really care about," he says.
"You know, aside from the table stakes of safety, obviously price and scheduling, convenience are No. 1 and No. 2 by a country mile.
"Things like a fancy club and fancy meals and all of that are relevant to a very small portion of customers.
"But for the vast majority of customers, they just don't value that as much. We will work with Paul [Scurrah] and his team to put a finer point on this."
When Murphy mentions fancy clubs he is referring to the strategy of former Virgin CEO, John Borghetti, who rolled out special Virgin clubs at airports in Sydney, Melbourne, Brisbane, Perth and Canberra. There are 4000 Velocity members entitled to use them.Murphy says his immediate objective will be to "try and stand the business back up as fast as possible and as big as possible".
"But it's got to be linked to customer demand – that really decides everything in terms of the fleet size and the size of employment. It just has to be led by how fast all the bookings come back."
Murphy said the more employees Virgin could employ the better it would be for all concerned.
"It's important to get the balance right," he said. "I mean, as you just saw with the Qantas announcements, coming out of the gate with too many planes and too much cost, just compromises the future of the whole business.
It would be disingenuous for us to promise everybody that they're going to have their job for life – it's just not a reality.
— Mike Murphy, Bain Capital
"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.
"But over time, international short haul will come back first and then long haul. I think we'll be pretty careful with which routes we keep and which we can't. The Hong Kong route, for example, has been an incredibly loss-making route for the business and just does not make sense to continue."
'Saving as many jobs as possible'
He says Virgin will maintain its commitment to regional routes. "We've been in some early discussions with Alliance about a partnership around regional so that we make sure regional coverage is all maintained."It will be a mix of Virgin's own planes and a combination with partners like Alliance that will make sure we retain original coverage."
Murphy expressed confidence that Bain could work with Virgin's unions.
"The union dynamic is obviously important. Over the past couple of weeks, I've had a lot of very constructive conversations with the likes of Michael Kaine [TWU] in particular, who I think is really the thought leader of the entire group along with Michele O'Neil at the ACTU.
"I just think the dynamic is not one where someone's got leverage and someone doesn't have leverage. I think we're just looking at what's the most constructive approach we can take to saving as many jobs as possible on the best terms that are possible, that actually provides for a sustainable business in the long term."
Murphy says there has been no hostility between Bain and the unions apart from Steve Purvinas, the federal secretary of the Australian Licensed Aircraft Engineers' Association.
It would seem to Chanticleer that Purvinas was dumb to pick a horse in a two-horse race when he knew he had to work with the winner irrespective of his crystal-ball-gazing ability.
But Purvinas tells Chanticleer he is happy with Bain's Victory.
"I won’t have a problem dealing with Bain, they know I am not a fence-sitter," he says.
"They also have to appease me if they want concessions in the engineers' EA. By coming out and picking a side, it forced Bain to increase job numbers substantially and ended the idea of JH [Jayne Hrdlicka] being CEO. I am pleased with the result."
Murphy says the present management of Virgin led by Scurrah had already been talking to the unions about changing various enterprise bargaining agreements [EBA] and talks would continue under Bain.
He says several EBAs have expired and regardless of the deal need to be dealt with.
"I would expect there'll be a revisiting of all of those [EBAs], but it'll be in the fullness of time," he says.
"We don't want to rush it at all. So it's not the case that we would try to jam a full negotiation to be done by the second creditors' meeting.
"We want to basically work with the unions and lay out together a timetable and a consultation approach that works for them, works for us. If that means it's multiple months, that's fine."
Murphy says he is looking forward to working with Scurrah.
"We're a performance-based culture and he has a performance-based philosophy as well. We're behind him and his team and if everything goes well and everything's great that would be nice.
"One thing we were worried about over the past couple weeks is that it would be disingenuous for us to promise everybody that they're going to have their job for life – it's just not a reality for me or for anybody. It's all about delivering on the plan."
Murphy says the work done by Bain as part of its due diligence and preparation of its bid was the second most comprehensive and complex undertaken by the firm in its 36-year history.
The only deal more complex was a transaction in Japan several years ago with Toshiba Corporation.
Bain's team working on the Virgin deal includes 15 people from private equity and credit split between New York, Boston, Hong Kong and Sydney. Also, there were many external advisers.
"It's a multimillion-dollar adviser bill," he says. "I think we had about 60 external advisers across PwC, KordaMentha, Freehills, Goldman Sachs and a couple of other specialist advisers."
JobKeeper extension
Murphy believes the detailed work done by Bain was critical to its success."I think the administrators would have got a lot of confidence by the detailed work that we've done – bottom up issue-by-issue, the analysis and the detail," he says.
"Of course, for them, it's really important that the person who takes this asset is going to be stable, has done their work, has gotten funding and follow-on funding, which is necessary to make sure the business survives into the future."
Murphy makes a compelling argument in favour of extending the federal government's JobKeeper payments for aviation workers for another six months beyond September this year.
"What I would say, and I have been saying this to the unions as well, a thousand redundancies at Virgin will cost $50 million dollars," he says.
Related
Qantas job shock sparks airline help
"But an extension of JobKeeper for six months from September for the same thousand people would cost $1500 a fortnight for six months which is $20 million."Murphy says it would be "crazy" to put people through the emotional turmoil of redundancy only to have to hire them back later if customer activity picks up.
"We've been pushing for this for the sector, not just for Virgin but for Qantas and others."
Murphy's argument in favour of extending JobKeeper for the aviation sector was helped by this week's announcement from Qantas that it would sack 6000 people.
Australia’s resident ‘expert’ has just predicted 2000 jobs to go. The news is saying it will be returning as a LCC, which to my understanding is inaccurate.
best of luck to everyone at VA, no matter your role. And that’s from the ‘competition’ who has absolutely no desire to see you fold or benefit from VA’s demise. I know that might disappoint old mate ‘Seriously’ above, but I guess there are massive bell ends in all airlines. Just found one in VA.
best of luck to everyone at VA, no matter your role. And that’s from the ‘competition’ who has absolutely no desire to see you fold or benefit from VA’s demise. I know that might disappoint old mate ‘Seriously’ above, but I guess there are massive bell ends in all airlines. Just found one in VA.
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From the AFAP
“We are also advised that Bain has signed an Asset Sale Agreement (“ASA”). This will provide them first option to purchase assets in the unlikely event the DOCA fails both tests (i.e. it is not supported by both a majority in value and a majority in number of the creditors). The ASA undermines any threat from bond holders or other creditors seeking to improve their position by voting down a DOCA. The administrator’s position is that one way or another the business will be sold to Bain as the preferred bidder”
So for all you doomsday flight crew wanting Virgin 2.0 to fail.
F$&k OFF !!!
The deal is done regardless if the vote is no at the creditors meeting.
Show support for you fellow aviation colleagues that will lose their career from this sale. 737 crews are the lucky ones just by chance.
“We are also advised that Bain has signed an Asset Sale Agreement (“ASA”). This will provide them first option to purchase assets in the unlikely event the DOCA fails both tests (i.e. it is not supported by both a majority in value and a majority in number of the creditors). The ASA undermines any threat from bond holders or other creditors seeking to improve their position by voting down a DOCA. The administrator’s position is that one way or another the business will be sold to Bain as the preferred bidder”
So for all you doomsday flight crew wanting Virgin 2.0 to fail.
F$&k OFF !!!
The deal is done regardless if the vote is no at the creditors meeting.
Show support for you fellow aviation colleagues that will lose their career from this sale. 737 crews are the lucky ones just by chance.
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The administrator’s position is that one way or another the business will be sold to Bain as the preferred bidder
Or is there another step following a failed DOCA vote that allows the administrator to decide the outcome and avoid liquidation (Clearly the preferred option) ?
I hope I'm wrong too!
But have been there, done that, 30 yrs ago, with the pilots dispute and the Ansett debacle and Australian aviation destroyed by the Hawke labour guvmint!
In this climate no one will buy an airline with a 7 Billion dollar debt!
Surely you can all see that?
But have been there, done that, 30 yrs ago, with the pilots dispute and the Ansett debacle and Australian aviation destroyed by the Hawke labour guvmint!
In this climate no one will buy an airline with a 7 Billion dollar debt!
Surely you can all see that?
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There are potential other steps, but Deloitte will just drive the company into liquidation if the vote is no. However, Bain have covered their tracks very cleverly and will have what assets/workforce/AOC they want regardless if this is the case.
Although they sound brutal, it will be nice to be managed by people who know what they are doing for once. Domestic has always made the money in Virgin with the 737’s.
Borghetti and the board should be held accountable for their poor decisions and excessive spending. Allowing one department to rob from the other to serve their personal KPI and various bonus’s. Look at Karl from velocity abandoning ship with 8 million plus payout.
The non stop rotation of middle management and massive payouts over the last eight years, if they dare stood up to the little Hitler himself, were tossed out like garbage. Extracting millions of payouts every time.
The phrase, “JWI” - John wants it, were thrown around the head office constantly. Even though these poor decisions were bleeding the company dry for years. Who in their right mind would sign up six A330’s with five different leasing companies 80% above market value - the most expensive in the world ! Even at the start pulling two ex EK clapped out A330’s out of the desert to start, to end up releasing them out whilst virgin pays a percentage of the cost.
Scurrah’s plan so far has worked. The COVID-19 pandemic and voluntary administration gives him the tools to accelerate and undo where Borghetti and the board failed.
Although they sound brutal, it will be nice to be managed by people who know what they are doing for once. Domestic has always made the money in Virgin with the 737’s.
Borghetti and the board should be held accountable for their poor decisions and excessive spending. Allowing one department to rob from the other to serve their personal KPI and various bonus’s. Look at Karl from velocity abandoning ship with 8 million plus payout.
The non stop rotation of middle management and massive payouts over the last eight years, if they dare stood up to the little Hitler himself, were tossed out like garbage. Extracting millions of payouts every time.
The phrase, “JWI” - John wants it, were thrown around the head office constantly. Even though these poor decisions were bleeding the company dry for years. Who in their right mind would sign up six A330’s with five different leasing companies 80% above market value - the most expensive in the world ! Even at the start pulling two ex EK clapped out A330’s out of the desert to start, to end up releasing them out whilst virgin pays a percentage of the cost.
Scurrah’s plan so far has worked. The COVID-19 pandemic and voluntary administration gives him the tools to accelerate and undo where Borghetti and the board failed.
So in the wash up..what is the general consensus on numbers out the door? QF has put Up 20%
Surely Bain would be looking at 40-50% when it looks to return with a weaker domestic capacity. 330’s and 777’s from all reports are set to go. The tiger cabin crew who remained on...what is the need for them when the 737 fleet is set to be cut back significantly.
Thoughts?
Surely Bain would be looking at 40-50% when it looks to return with a weaker domestic capacity. 330’s and 777’s from all reports are set to go. The tiger cabin crew who remained on...what is the need for them when the 737 fleet is set to be cut back significantly.
Thoughts?
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Maxter - have you not kept up on current events?
They just made a successful, legally binding bid.
It is comments like yours why I barely comment on this forum. I should not have wasted brain power trying to educate you and your other fellow pessimistic comrades what just happened. 🙄
Virgin Australia is set to be resurrected by US private equity firm Bain Capital into a leaner airline with a broader range of fares to suit economy travellers.
The Boston-based company was confirmed as the winning bidder for the debt-riddled airline on Friday, after rival Cyrus Cap*ital Partners pulled out citing a “lack of engagement” by administrator Deloitte.
Under the vision of Bain’s Australian chief executive, Mike Murphy, and Virgin Australia management, the airline will retain* the modest business-class cabin on its Boeing 737s but provide the majority of passengers in economy with more options.
These will include paying extra for more legroom or a preferre*d window seat, or less for the bare basics of a seat and carry-on luggage.
Technology will be upgraded to improve the customer experience from booking to check-in, and Velocity frequent flyer points will tick over at every opportunity, with Bain envisioning greater engagement between the airline and its 10-million-member loyalty program.
Although it will still be possible to visit a lounge before boarding for eligible travellers, Bain wants to do away with the exclusive domain of VIPs known as The Club.
There would also be no trying to persuade passengers to board new Boeing 737 Max aircraft, which remained grounded after two fatal crashes.
Mr Murphy indicated the curren*t order with Boeing for 48 new Max 8 and 10 aeroplanes would be torn up as part of the administrati*on process.
“The opportunity has to be taken to match fleet size to custom*er demand,” he said.
Bain is expected to waste no time implementing its plan, despite the sale of Virgin Australia still being reliant on an August 22 creditors’ meeting.
As well as providing upfront financ*e in excess of $100m, the cashed-up company will make a further capital injection in the vicinity of $1bn to help the airline rebuild post-COVID.
With a fleet of between 60 and 70 single-aisle Boeing 737s, Bain’s Virgin Australia will service major domestic routes and a range of regional centres.
Mr Murphy suggested *opera*tions were likely to be limited to 40-50 aircraft at the outset, to maintain a high level of reliability.
“We’re very keen to make sure we retain a healthy buffer of aircraft above consumer demand,” he said. “Demand bounces back pretty quickly, and we want to have capacity to turn back on.”
In addition to fewer aircraft, Virgin 2.0 would have a significantly reduced workforce of 5000-6000 employees, a little more than half of the pre-coronavirus number.
The majority of those would be based in Brisbane, under a $200m deal struck with the Queensland government, which would also deliver the state a “strategic equity stake”.
“Queensland is the home of aviation in Australia, and we are thrilled that our investment, a mix of equity and economic incentiv*es, has helped to secure that into the future,” Treasurer Cameron Dick said.
Unions that had previously backed Cyrus indicated they were more than willing to work with Bain, after Mr Murphy reached out to them. Flight Attendants Association of Australia secretary Teri O’Toole said the FAAA was keen to engage with Bain on behal*f of members.
The retention of the Virgin brand was another key element of Bain’s bid, ensuring the support of Virgin Group chief executive Josh Bayliss. Despite refusing to “take sides” through the administration process, he expressed his satisfaction with the result.
“Time is now of the utmost importance*, and we cannot afford delay in getting the company back in the air for the benefit of its customers, its employees and the wider Australian economy,” said Mr Bayliss.
They just made a successful, legally binding bid.
It is comments like yours why I barely comment on this forum. I should not have wasted brain power trying to educate you and your other fellow pessimistic comrades what just happened. 🙄
Virgin Australia is set to be resurrected by US private equity firm Bain Capital into a leaner airline with a broader range of fares to suit economy travellers.
The Boston-based company was confirmed as the winning bidder for the debt-riddled airline on Friday, after rival Cyrus Cap*ital Partners pulled out citing a “lack of engagement” by administrator Deloitte.
Under the vision of Bain’s Australian chief executive, Mike Murphy, and Virgin Australia management, the airline will retain* the modest business-class cabin on its Boeing 737s but provide the majority of passengers in economy with more options.
These will include paying extra for more legroom or a preferre*d window seat, or less for the bare basics of a seat and carry-on luggage.
Technology will be upgraded to improve the customer experience from booking to check-in, and Velocity frequent flyer points will tick over at every opportunity, with Bain envisioning greater engagement between the airline and its 10-million-member loyalty program.
Although it will still be possible to visit a lounge before boarding for eligible travellers, Bain wants to do away with the exclusive domain of VIPs known as The Club.
There would also be no trying to persuade passengers to board new Boeing 737 Max aircraft, which remained grounded after two fatal crashes.
Mr Murphy indicated the curren*t order with Boeing for 48 new Max 8 and 10 aeroplanes would be torn up as part of the administrati*on process.
“The opportunity has to be taken to match fleet size to custom*er demand,” he said.
Bain is expected to waste no time implementing its plan, despite the sale of Virgin Australia still being reliant on an August 22 creditors’ meeting.
As well as providing upfront financ*e in excess of $100m, the cashed-up company will make a further capital injection in the vicinity of $1bn to help the airline rebuild post-COVID.
With a fleet of between 60 and 70 single-aisle Boeing 737s, Bain’s Virgin Australia will service major domestic routes and a range of regional centres.
Mr Murphy suggested *opera*tions were likely to be limited to 40-50 aircraft at the outset, to maintain a high level of reliability.
“We’re very keen to make sure we retain a healthy buffer of aircraft above consumer demand,” he said. “Demand bounces back pretty quickly, and we want to have capacity to turn back on.”
In addition to fewer aircraft, Virgin 2.0 would have a significantly reduced workforce of 5000-6000 employees, a little more than half of the pre-coronavirus number.
The majority of those would be based in Brisbane, under a $200m deal struck with the Queensland government, which would also deliver the state a “strategic equity stake”.
“Queensland is the home of aviation in Australia, and we are thrilled that our investment, a mix of equity and economic incentiv*es, has helped to secure that into the future,” Treasurer Cameron Dick said.
Unions that had previously backed Cyrus indicated they were more than willing to work with Bain, after Mr Murphy reached out to them. Flight Attendants Association of Australia secretary Teri O’Toole said the FAAA was keen to engage with Bain on behal*f of members.
The retention of the Virgin brand was another key element of Bain’s bid, ensuring the support of Virgin Group chief executive Josh Bayliss. Despite refusing to “take sides” through the administration process, he expressed his satisfaction with the result.
“Time is now of the utmost importance*, and we cannot afford delay in getting the company back in the air for the benefit of its customers, its employees and the wider Australian economy,” said Mr Bayliss.
If the creditors/bondholders (biggest value vote) vote against the DOCA in august and the employees (biggest numbers vote) vote for it then it’s a tie. The administrators then have a tie breaking vote and I think we know which way that would go and the sale will go through. Despite the ructions from a few unions who preferenced Cyrus a few weeks ago, are they now not going to vote for Bain and hence cause a liquidation and the loss of ALL the jobs, I don’t think so. The sale will go through eventually......I hope. Court action may slow the process but because of the Administration process it’s unlikely they will intervene, they haven’t much in the past. Bain is now liable for all expenses that VA incurs and they are racking up a rather large bill, after having spent millions over the last 2 months already, that shows their sincerity and so unlikely they will pull out. And yes, IF liquidated, the AOC, the slots, all the hard won (with CASA) approvals.....all gone. The slots are probably the most valuable asset and Bain only has first right to purchase them but then what would they do with them. On selling them to someone would be an option, but it won’t come to this.....again, I hope.
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If the creditors/bondholders (biggest value vote) vote against the DOCA in august and the employees (biggest numbers vote) vote for it then it’s a tie. The administrators then have a tie breaking vote and I think we know which way that would go and the sale will go through. Despite the ructions from a few unions who preferenced Cyrus a few weeks ago, are they now not going to vote for Bain and hence cause a liquidation and the loss of ALL the jobs, I don’t think so. The sale will go through eventually......I hope. Court action may slow the process but because of the Administration process it’s unlikely they will intervene, they haven’t much in the past. Bain is now liable for all expenses that VA incurs and they are racking up a rather large bill, after having spent millions over the last 2 months already, that shows their sincerity and so unlikely they will pull out. And yes, IF liquidated, the AOC, the slots, all the hard won (with CASA) approvals.....all gone. The slots are probably the most valuable asset and Bain only has first right to purchase them but then what would they do with them. On selling them to someone would be an option, but it won’t come to this.....again, I hope.
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Maybe a silly question, but how does Virgin Mk2 intend to fly internationally ? Being now 100% foreign owned they can't fly to international destinations. Virgin Mk 1.0 got around that by having international supposedly owned by a Australian entity which issued shares valued at virtually zero to current shareholders, a dubious outcome. But as it stands Virgin Mk 2 can't fly internationally if it 100% foreign owned.
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