Virgin Australia. Image by AdobeStock
The engagement of Virgin Australia to Bain Capital, announced on Friday as the culmination of a long search to match the troubled airline with a cash-rich suitor, may turn out to be a winner.
Although the wedding ring isn’t quite on the finger yet, preferred partner Bain seems to be saying all the right things: honour employee entitlements, preserve thousands of jobs, and honour all travel credits already incurred as part of the frequent flyer programme.
Even the Queensland government, which once sought to become a suitor itself and take over the airline but was subsequently jilted, is happy. This is because Virgin looks likely to remain headquartered in Brisbane and thereby preserve thousands of Queensland jobs.
But before the pair head down the aisle to make it all legal, there is still the final seal of approval for the sale that needs the agreement from the majority of creditors. They are due to meet in August.
There are around 12 000 such creditors who are owed about $7-billion since the airline went into administration in April.
According to ABC News, the biggest of the creditors include secured lenders who are owed about $2.3-billion, approximately 50 aircraft lessors owed nearly $1.9-billion, and more than 9 000 employees owed $451-million.
Unsecured bondholders, who stand to lose a large part of their $2-billion investment in Virgin as a result of its collapse, are preparing a last-ditch buyout proposal of around $1-billion, which will also need to be considered by creditors.
Under Australian law, they are not bound by the administrator’s timelines and may make an offer at almost any time.
They could also agree a deal with Bain, rather than bidding against the US-based company.
Bain is a global investment firm and has had a strong presence in Australia for many years.
ABC News quotes local MD, Mike Murphy, as saying: “Bain Capital brings deep aviation experience, a proven commitment to Australia with a 20-year on-the-ground presence and the long-term capital to bring certainty and stability to Virgin Australia.
“Bain Capital’s plan for Virgin Australia will see it return to its core strengths both strategically and operationally and re-establish itself as an iconic Australian airline.”
Transport Workers’ Union national secretary Michael Kaine said preserving the jobs of Virgin Australia’s workers now depended on the Federal Government extending JobKeeper and supporting the airline with an aviation package.
“We want the fullest footprint possible for Virgin and how full it is will really depend on the Federal Government stepping up,” he told ABC News. “The extent of job losses can be minimised, but it is very much in the Government’s hands.”