Virgin Australia - discussion

[ozbob]

The Australian --> Ministers fume over Virgin salvage plans

Senior Morrison government ministers are privately furious with administrators trying to salvage­ Virgin Australia, amid claims the process has been ­botched and concerns that region­al routes and jobs could be slashed by the two US hedge funds vying for the airline.

The Australian understands the government is concerned that there is no guarantee Virgin Australia might not fall over again within six months.

The only serious Australian bidder, which had promised to guarantee regional services through a reduced cost base, has been knocked out.

Sources close to the process claim New York-based bidder Cyrus Capital and Bain Capital, based in Boston, have not been engaged on plans for worker concession­s and entitlements, regional­ services or competitive advantage.

A senior government source said that, just as the government ­refused to bail out Virgin Australia before it fell into administration in April, there would be no commonwealth money to help the airline if it went out of business because the wrong bidder was selected.

Bain Capital, the fund started by US Republic senator and former­ presidential candidate Mitt Romney, and "minnow" fund Cyrus, linked to Richard Branson, are expected to lodge their final bids on Monday.

A government minister said there was "deep frustration" about the process undertaken by Virgin Australia administrator Deloitte. There is also concern about the new ownership structure being put in place before state borders reopen and ­JobKeeper payments wind up in September.

Senior government sources said Virgin's administrators had miscalculated by leaving two US hedge funds in the race and excluding­ BGH Capital and Aust­ralian Super, which were proposing to inject between $800m and $900m of working capital into the airline.

The government decided not to proceed with a rescue package after The Australian revealed in April that Virgin Australia had requested­ financial support from the commonwealth in the order of $1.4bn. Other Western nations provided bailouts to major airlines, including US giant Delta and Singapore Airlines, which ­received $9bn in support.

Despite promises from bidders that there would be no mass job cuts, the Virgin 2.0 plans are ­expected to streamline the loss-making airline, potentially affecting 10,000 employees and 6000 contractors, many of whom have fallen on to JobKeeper payments, which end on September 27.

Regional government MPs have raised concerns about the potential for a new Virgin Australia owner to revert to a Virgin Blue capital-city model. A previous regiona­l airline investment by Cyrus in Britain ended with the company in administration.

North Queensland Nationals senator Matt Canavan raised concerns ahead of an expenditure review­ committee of cabinet meeting earlier this year about losing control of the process.

"I remain concerned that the Virgin 2.0 that comes out of this may not serve regional Australia," Senator Canavan said. "That means it's important we as the government look to support airline services in regional Aust­ralia after this sale process. There's a variety of ways we could do that — including considering options of supporting a new Virgin in some way, shape or form. Another is establishing a more dedicated regulatory structure, which supports competition."

Deputy Prime Minister Mich­ael McCormack, who holds the transport and infrastructure ­portfolios, said the government's preference had "always been and continues to be a market-led solution­ for Virgin". "We remain confident this solution­ will see Virgin Australia emerge in the best position possible post-pandemic and we continue to work constructively with the administrator and interested parties to understand their progress."

The Nationals leader, who has announced more than $1.3bn in COVID-19 aviation support measures, said the government continued to support regional aviation networks with up to 164 weekly services on 74 routes, ­accessing more than 100 regional and remote communities. Ahead of the looming deadline for binding offers, Cyrus bid proponents, backed by the Flight Attendants Association of Australia and Australian Lic­ensed Aircraft Engineers Association, pledged to retain Virgin Australia chief Paul Scurrah and senior management.

Scott Morrison's push to get the states and territories to reopen their borders has been partly motivated by getting the aviation industry up and running.

Deloitte declined to comment.

[ozbob]

https://twitter.com/ozbob13/status/1273642906956398592

[ozbob]

Gold Coast Bulletin --> Virgin Australia to remain based in Queensland after Queensland Investment Corporation strikes deal with bidders

A REVAMPED Virgin Australia and hundreds of jobs are set to remain in Brisbane after the Queensland Investment Corporation struck a deal with the two bidders battling for ownership of the airline.

Cyrus Capital and Bain Capital have today lodged their final bids for the embattled airline, which collapsed into voluntary administration in April.

Administrator Vaughan Strawbridge of Deloitte will consider the bids before announcing a winner before the month's end.

It is understood Cyrus and Bain have reached an agreement with the Queensland Investment Corporation, doing its bidding on behalf of the State Government, to keep Virgin's headquarters in Brisbane.

Treasurer Cameron Dick announced earlier this year the state would put up $200 million to the bidder who was prepared to retain the headquarters in Queensland.

A spokesman for QIC confirmed it had "fruitful discussions" with Cyrus and Bain.

"We've been talking with all bidders and we've been very actively pursuing the interest of the state," he said.

Earlier this month Bain Capital revealed to The Courier-Mail it would take a significant offer from New South Wales or Victoria to lure Virgin away from Queensland.

About 1300 of the airline's corporate and highly-skilled staff are based here.

[ozbob]

https://twitter.com/theage/status/1276279534019645441

[ozbob]

https://twitter.com/smh/status/1276327931707641856

[verbatim9]

It's good that Bain has the opportunity to buy Virgin. I think a LCC Hybrid model will work well.

[ozbob]

INQLD -->Sold! Virgin's new owner promises to inject capital, remain based in Brisbane

Bain Capital has won the bid for Virgin Australia with the airline staying at its Brisbane base under the deal.

Administrators Deloitte said that after a comprehensive sale campaign supported by the Virgin management team and their advisors a sale and implementation agreement had been initiated with Bain Capital.

The announcement was light on details of the deal including a price, but Premier Annastacia Palaszczuk said on Twitter "Virgin Airlines will continue as Australia's second national carrier and its headquarters will stay in Queensland".

"Keeping Queensland jobs in Queensland as we deal with the economic fallout of the global coronavirus pandemic is part of our plan to restore our economy and create jobs," Palaszczuk said.

Deloitte said the agreement with Bain would result in the sale and recapitalisation of Virgin Australia Holdings and its subsidiary businesses which operates the Virgin Australia and Tiger airlines.

"Completion of the transaction will occur after the second meeting of creditors, which is currently scheduled to occur before the end of August," Deloitte said

"Bain Capital has received necessary regulatory approvals under the Australian Government's foreign investment laws to complete the transaction."

Deloitte said the deal supported the current management team led by Paul Scurrah and their improvement plan for the airline.

It committed to the retention of thousands of jobs, carried forward all travel credits and Velocity frequent flyer booked flights and honoured all employee entitlements.

While it committed to keeping thousands of jobs, it did not rule out job losses and the ACTU said there was likely to be some people who lose their jobs.

Deloitte said the deal also provided a significant injection of capital to see the business recapitalised and well-positioned for the future.

Joint administrator Vaughan Strawbridge said it was an important milestone and a significant achievement.

"Bain Capital has presented a strong and compelling bid for the business that will secure the future of Australia's second airline, thousands of employees and their families and ensure Australia continues to enjoy the benefits of a competitive aviation sector," Strawbridge said.

"The Virgin Australia Group entered administration as a direct result of an unprecedented global pandemic which all but grounded its operations whilst in the midst of a major transformation of the business led by Paul Scurrah and the management team."

No return to shareholders is anticipated and it was not possible to determine the estimated return to creditors, however an update will be provided ahead of the second meeting of creditors.

"From day one of our appointment, we have focused on achieving the best possible outcomes that a restructured, sustainable and profitable airline can deliver to all stakeholders.

"In just over eight weeks, this is a very positive outcome. We have certainly been heartened by the levels of interest shown by parties, in spite of the prevailing COVID-induced market conditions, how our final two groups have approached their bids, and how support for the business has come from so many quarters.

"This result could not have been achieved without the support and hard work of the Virgin Australia team, who we have had the privilege of working with over the last eight to nine weeks. We would also like to thank them for their ongoing support and engagement."

The decision followed the withdrawal this morning of the second bidder, US hedge fund Cyrus Capital after it complained of a lack of engagement from Deloitte.

The decision by Cyrus to walk away was seen as a strategic withdrawal from a company that had realised it was not going to win the bid, according to Airline Ratings Geoff Thomas.

"I think it was extraordinary and totally out of left field," Thomas said.

"Cyrus was considered to be the frontrunner."

However, he said both Cyrus and Bain had been "two very good bidders".

Virgin Mk2 is likely to be a smaller airline with full domestic and short-haul international services. It is expected to start with about 40 planes and grow to about 70.

[verbatim9]

I wonder if there will be branding changes in the future. e.g. Tiger or Virgin?  Tiger should be rebranded to a name synonymous to the Asian region. Maybe to Scoot under licence? Or another unique name.

[Gazza]

I wonder if there will be branding changes in the future. e.g. Tiger or Virgin?  Tiger should be rebranded to a name synonymous to the Asian region. Maybe to Scoot under licence? Or another unique name.

Tigers are Asian 

[SurfRail]

All available information suggests Tiger is a dead duck, and anything that is not a 737 will be sold or returned to the lessor.

[verbatim9]

Yes but the brand is a dying brand in the region. They might absorb the brand and rename it to Virgin? But if remained as a LCC it may need another name.

[SurfRail]

Tiger's dead.  Not coming back.  Virgin have no reason to make the same mistakes as before - they will be positioning themselves between JQ and QF this time instead of trying to be all things to all people.  No need for a carrier competing with JQ with only a 6th or less of JQ's fleet.

[ozbob]

http://statements.qld.gov.au/Statement/2020/6/26/virgin-to-remain-queenslands-national-airline

Virgin to remain Queensland's national airline

Virgin Australia will remain the national carrier of Queensland after Queensland fended off attempts from other states to attract the airline.

Queensland Treasurer Cameron Dick confirmed today that Bain Capital had been selected by administrator Deloittes as the preferred bidder for the airline, pending a final agreement with creditors in August.

The Treasurer said he was delighted that Virgin Airlines would continue as Australia's second national carrier, with its headquarters to remain in Queensland.

"Keeping Queensland jobs in Queensland as we deal with the economic fallout of the global coronavirus pandemic is very important," the Treasurer said.

"We're managing the health response and now we can start delivering Queensland's plan for economic recovery.

"Part of our plan, Unite and Recover for Queensland Jobs, is about supporting traditional industries like tourism.

"Importantly, Queenslanders will now also own a strategic equity stake in the airline.

"Queensland is the home of aviation in Australia, and we are thrilled that our investment, a mix of equity and economic incentives, has helped to secure that into the future.

"The Palaszczuk Government's investment, facilitated by Queensland Investment Corporation (QIC), will ensure that Virgin's headquarters remain in Brisbane, retaining thousands of direct and indirect jobs.

"We have always said a second national airline is critical for Australia, for jobs, for tourism, domestic travel and freight.

"We will always back Queensland jobs, and we will always act in the best interests of Queenslanders.

"If the investment did not stack up, we would not have proceeded, but through QIC, we have landed a solid, commercially astute deal, that will benefit Queensland.

"As we unite and recover from COVID-19, this is a deal that will secure hundreds of jobs and livelihoods throughout Queensland.

QIC's Damien Frawley said its State Investments team had applied a disciplined commercial lens in assessing the State's investment, in alignment with its broader economic goals for Queensland.

"We are well-equipped to manage the State's interest with a track record as an acquirer, owner and manager of nationally significant assets for both governments and long-term investors," he said.

"Our task was to secure a sound commercial outcome for Queensland, and this deal represents a solid investment in a new-look Virgin Airlines."

The Treasurer thanked QIC, administrator Deloittes and congratulated Bain Capital on being the preferred bidder.

"We look forward to working with Bain Capital on behalf of all Queenslanders."

Ends.

[AnonymouslyBad]

All available information suggests Tiger is a dead duck, and anything that is not a 737 will be sold or returned to the lessor.

Agree, Tiger is dead.

I get the strategic play in controlling Tiger but buying Tiger and then continuing to run it like a viable business was such a weird decision by VA, and one of the biggest mistakes they've made IMO. But then I guess Virgin was busy pretending to be a premium airline instead of mid market so it kind of went hand in hand.

[Arnz]

Paywall articles confirms that most (if not all leased) aircraft will be returned. 

This is basically 20 of the 737s and all non-737s that are leased (basically the entire Airbus and ATR fleet).

The only non 737 aircraft that will be kept, but mothballed (until 2021/2022), will be the fleet of 777s that are used to LAX.

The Fokkers (which are owned by VA) that are used with the Regional Fleet for WA Regional/FIFO operations are up in the air, but early suggestions suggest that Alliance may be an interested buyer for VA's Fokker fleet (I would assume Alliance would take over VA regional's FIFO work).

[red dragin]

Hopefully Alliance do.

Flew on two of their Fokkers last year (was meant to in April this year as well). You wouldn't know they were 20+ year old airframes.

Quite a sprightly little plane, though after landing at Brisbane the pilot had to accelerate up again to get us off the runway, which was a different experience.

[verbatim9]

Paywall articles confirms that most (if not all leased) aircraft will be returned. 

This is basically 20 of the 737s and all non-737s that are leased (basically the entire Airbus and ATR fleet).

The only non 737 aircraft that will be kept, but mothballed (until 2021/2022), will be the fleet of 777s that are used to LAX.

The Fokkers (which are owned by VA) that are used with the Regional Fleet for WA Regional/FIFO operations are up in the air, but early suggestions suggest that Alliance may be an interested buyer for VA's Fokker fleet (I would assume Alliance would take over VA regional's FIFO work).

They could use the 777's for Perth runs to and from the East Coast.

[JimmyP]

Paywall articles confirms that most (if not all leased) aircraft will be returned. 

This is basically 20 of the 737s and all non-737s that are leased (basically the entire Airbus and ATR fleet).

The only non 737 aircraft that will be kept, but mothballed (until 2021/2022), will be the fleet of 777s that are used to LAX.

The Fokkers (which are owned by VA) that are used with the Regional Fleet for WA Regional/FIFO operations are up in the air, but early suggestions suggest that Alliance may be an interested buyer for VA's Fokker fleet (I would assume Alliance would take over VA regional's FIFO work).

They could use the 777's for Perth runs to and from the East Coast.

Sure, if they want to fly straight back in to bankruptcy.

[ozbob]

Brisbanetimes --> Virgin Australia bondholders move to derail sale to Bain

Large owners of Virgin Australia's unsecured bonds have launched an extraordinary intervention to derail the bankrupt airline's sale to Bain Capital and allow creditors to vote on their alternative plan for the company.

Virgin's administrator Deloitte announced on June 26 that it had entered a binding agreement for the US private equity giant Bain to buy and relaunch Virgin, but has so far refused to release the terms of the deal.

The Australian government Takeovers Panel said on Monday it had received an application from Broad Peak Investment Advisers and Tor Investment Management – which own some of Virgin's $2 billion of unsecured bonds – asking the regulator to intervene in the Bain deal.

The panel said bondholders argue that "certain circumstances regarding the process conducted by the administrators are unacceptable" and blocked them from presenting an alternative deal to creditors at the second creditors' meeting in August.

Creditors – which include about 9000 workers, secured bank lenders and aircraft lessors - are owed a combined $6.8 billion.

The bondholders are seeking an interim order forcing Deloitte and Bain to release the terms of the proposed sale, and final orders that would enable the bondholders to submit their plan for Virgin to a creditors' vote.

The Takeovers Panel said it had not decided whether to conduct proceedings on the matter and made no comment "on the merits of the application".

A spokesman for Deloitte said the administrators believed the bondholders' action was "without merit". "They will present information to the Panel as required to refute all claims made by the applicants," he said.

"The administrators have undertaken a process which has resulted in a sale to Bain Capital, and which provides certainty for the future of the airline."

Bondholders, advised by boutique Sydney firm Faraday Associates and lawyers from Corrs Chambers Westgarth, had proposed swapping their $2 billion in debt for ownership of Virgin. The group said they would pour $925 million into the company in a recapitalisation plan and Virgin would remain listed on the Australian Stock Exchange.

Deloitte, however, rejected the proposal, saying it was too conditional and that there was no evidence of committed funding.

There has been growing unrest among bondholders about how much of their debts they will recover with most believing it will be between 6.5¢ and 10¢ in the dollar, or as little as $130 million of the $2 billion they are owed.

The total value of the debt owed to the two bondholders behind Monday's application is not known. Virgin's bonds are owned by 30 large institutional investors and about 6000 "mum and dad" retail investors.

The Singapore-based Broad Peak is backed by Singapore's sovereign wealth fund Temasek, which held an interest in Virgin through its majority ownership of Singapore Airlines, which in turn owned 20 per cent of Virgin. Tor is a Hong Kong hedge fund that specialises in high-yield credit.

[verbatim9]

Couriermail----- VA HQ move confirmed

Virgin Australia will vacate its Bowen Hills office and move in with Flight Centre to create a tourism powerhouse at South Bank.

The Courier-Mail can reveal Virgin Australia staff were on Tuesday informed the airline will leave its Bowen Hills 'Virgin Village' in two months.

[ozbob]

Couriermail --> Virgin Australia: QLD workers face axe from state-owned airline

VIRGIN Australia won't guarantee the protection of hundreds of Queensland workers despite taxpayers investing $200m in the resurrected carrier.

Questions are now mounting about the State Government's deal with Virgin's new owner Bain Capital following Wednesday's news that 3000 airline workers would lose their jobs as part of a major overhaul of the carrier.

Job cuts will be made across Virgin's corporate and operations roles as the airline moves to a Boeing 737-only fleet and dumps the tainted Tigerair brand.

Redundancy consultation with workers have started, but Virgin Australia managing director Paul Scurrah said he couldn't "guarantee it's going to be capped at 3000".

"This is an industry that is in constant crisis at the moment," he said.

"This is another very big and devastating decision."

Mr Scurrah told The Courier-Mail the Queensland Government's $200m stake in Virgin Australia had a "limited impact" on his decision to cut jobs and overhaul the carrier.

"In terms of the impact on our business plan, it was always going to follow what would make this a successful and profitable business in the future," he said.

Treasurer Cameron Dick is yet to reveal what taxpayers will receive from the state's investment in the airline but said the government was "working hard to save as many Queensland jobs as possible by keeping Virgin's headquarters in Queensland".

The government has an in-principle agreement with Bain Capital, however it won't become legally binding until Bain takes ownership of the airline, now likely to be on September 4.

The uncertainty prompted LNP Deputy Leader Tim Mander to call on the Palaszczuk Government to "guarantee that no Queenslander will lose their job".

"Annastacia Palaszczuk chose to gamble $200 million of taxpayers' money when the government didn't need to ... Labor must prove the investment was worth it," he said.

Virgin will continue operating a reduced domestic schedule, with long-haul international flights suspended and all lounges closed until demand returns.

It will remain a two-cabin carrier to prevent Qantas having "a monopoly" on Australia's business class travel.

Mr Scurrah, however, said the airline would not return to the Virgin Blue days of "cracking jokes and rolling toilet paper down the aisle".

Transport Workers' Union National Secretary Michael Kaine welcomed Virgin's decision to maintain a full-service airline and said the union would support workers.

VIRGIN'S SIX-POINT PLAN

Simplify everything

Virgin will only fly Boeing 737 aircraft, ditching its B777 and Airbus A330 and A320 fleet. Tigerair will be dumped and Virgin will consolidate its office space.

Customer value

Virgin aims to be the best value carrier in the market, not a low-cost carrier. It will keep business class cabins to prevent Qantas holding a monopoly on the market.

World-class data

Virgin will invest in improving its digital experience for customers, promising to upgrade outdated applications and online services

Harness culture

Management plan to build on work done in the past year to 'unlock its culture and harness the spirit of its people'.

Strong cash sheet

Backed by Bain Capital, Virgin Australia will emerge from administration with a strong balance sheet and capital to grow.

Jobs and growth

3000 workers will leave the airline. Management hopes the cut will secure the remaining 6000 jobs, and allow it to grow back to 8000 when travel demand returns.

[ozbob]

https://twitter.com/ozbob13/status/1295374207753150466

[ozbob]

ABC News --> Bain Capital's $3.5 billion offer for Virgin Australia revealed ahead of crucial creditors' vote

US private equity firm Bain Capital is offering $3.5 billion for Virgin Australia, with the return to the airline's unsecured creditors estimated between 9 and 13 cents on the dollar.

Virgin has more than 10,000 creditors, the bulk of which are its 9,000 employees, but which also include bondholders and aircraft lessors.

Bain's offer includes the payment of all $450 million in worker entitlements and all $2.3 billion of debt Virgin owes to secured creditors.

But a report to creditors from Virgin's administrator Deloitte estimated the return to unsecured bondholders would be between $462 million and $612 million.

There will be no return to Virgin's major shareholders which include Singapore Airlines, Etihad Airways, China's Nanshan Group and HNA and Sir Richard Branson's Virgin Group.

Bain has committed to honouring all customer travel credits.

Creditors will vote on the sale at a meeting on September 4.

Virgin Australia was placed into voluntary administration on April 21 with debts of $6.8 billion.

Like its rival Qantas, Virgin has instituted mass redundancies as a result of international airline travel halting due to the coronavirus pandemic and a dramatic reduction in domestic flying.

Earlier this month, Virgin said it would make about a third of its workforce redundant, with about 3,000 jobs expected to go under Bain Capital, while 6,000 staff will remain.

Joint voluntary administrator Vaughan Strawbridge said that the deal would provide certainty for employees and customers, and some return to creditors.

"And it can be completed sooner, and at less cost than other alternatives," Mr Strawbridge said.

"Now we just need to bring the airline out of administration as soon as possible."

[ozbob]

https://twitter.com/newscomauHQ/status/1301735795468849153

[ozbob]

Couriermail 10th September 2020 page 15

Virgin gives up routes

Regions worry retreat will result in a monopoly and fare increases

VIRGIN'S decision to halt regional flights could create a dangerous monopoly and leave rural residents isolated, locals say.

The embattled airline yesterday announced it would "withdraw" seven of its regional services "for the foreseeable future", including flights connecting Brisbane to Cloncurry, Cloncurry to Mt Isa, and Hervey Bay to Sydney.

Flights connecting Sydney to Uluru, Hervey Bay, Albury, Port Macquarie and Tamworth have also been scrapped, as well as the Melbourne to Mildura route.

The Courier-Mail understands Virgin will also cancel its Port Macquarie service, opting for a Brisbane to Port Macquarie codeshare partnership with Alliance Airlines.

The cancellations come as part of a rebuilding program after the airline was acquired by Bain Capital and were also the product of "ongoing subdued customer demand", a spokesman said.

Without the Virgin flights, Qantas will be the sole airline operating out of Cloncurry and Hervey Bay, igniting fears of astronomical price hikes.

"It was bad enough with a duopoly," said Cloncurry local and regional airfares advocate Hamish Griffin.

"I've seen airfares between Cloncurry and Townsville for two adults and one child for $4800. My concern is that it's just going to get worse."

Mr Griffin said he was concerned it would impact the town's tourism potential and its future growth.

"It's hard enough to get people to come and live here anyway ... when it's so hard to go down the coast or to Brisbane to visit anyone," he said.

Fraser Coast Tourism and Events general manager Martin Simons also feared a price hike, saying: "Qantas is important to us but we always want contestability."

The Fraser Coast had risen to the fifth most popular tourism destination in Queensland "in the past 18 months".

Mr Simons said the cessation of Virgin's Sydney to Hervey Bay route would be a "setback" for growth when borders reopened.

[red dragin]

We had flights booked for April with Virgin (flown by Alliance) to Emerald, $150 per seat. Seats now (for November - still Alliance planes) are $449. But if we book through Alliance for Moranbah (about the same distance) they are $150-$200.

We ended up putting our credit towards flights to Hamilton Island next month, where Virgin where $200 dearer than Qantas. But $280 out of pocket vs $780 out of pocket works for us at the moment.

I think Alliance will take over some of the smaller routes. They already have 41 in service aircraft with 15 more on their way.

[ozbob]

https://twitter.com/couriermail/status/1316258478059450369

[red dragin]

Well, glad we're flying with them at the moment.

Not alot of PT to report here on Hamilton Island (plenty of golf buggies tho) 

[Arnz]

We had flights booked for April with Virgin (flown by Alliance) to Emerald, $150 per seat. Seats now (for November - still Alliance planes) are $449. But if we book through Alliance for Moranbah (about the same distance) they are $150-$200.

We ended up putting our credit towards flights to Hamilton Island next month, where Virgin where $200 dearer than Qantas. But $280 out of pocket vs $780 out of pocket works for us at the moment.

I think Alliance will take over some of the smaller routes. They already have 41 in service aircraft with 15 more on their way.

Alliance had 15 or so Embraer 190s on the way.  I wouldn't be surprised if they took over some of VA's Qld Regional routes/Tourist Routes in their "own right" with some Qld Government subsidy to the smaller towns.

[ozbob]

https://twitter.com/ozbob13/status/1316576660217458689

[ozbob]

INQLD  --> Departure lounge: 'Incredibly tired' Scurrah says he wasn't best person to drive Virgin forward