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Virgin Australia: Gang of 4 bidders announced

Virgin Australia: Gang of 4 bidders announced

Apparently, there was plenty of midnight oil burnt over the last weekend, especially by the Virgin Australia administrators from Deloitte. Like in Masterchef, or perhaps more appropriately, Ru Paul’s Drag Race (Shantay, you stay!), there are four moving onto the finals – that is the second round, with final bids due on 12 June – less than 4 weeks away. And the winners are:

  • Bain Capital
  • BGH Capital
  • Indigo Partners
  • Cyrus Capital Partners (who? Where did they come from?)

Cyrus Capital have not appeared in any previous reports until the AFR revealed them late on Sunday night. This outfit has previously been an investor alongside Richard Branson in Virgin Atlantic.

The prize for this round is access to more information in the Virgin Australia data room from today, and they get to receive a pitch from Paul Scurrah, and the current Virgin Management team next week.

Surprise! Who’s in who’s out

There are some surprising omissions. Brookfield, a Canadian investor, once the hot favourite in some people’s minds did not get picked, despite some negotiations into the night. It was thought to have the support of some of the major unions involved. The SMH is reporting that they threatened to walk away from the process, deeming it overly complex, and expressing frustration with the Administrators.

Tatterang, Twiggy Forest’s vehicle didn’t get a guernsey. Regional Express (Rex) along with another regional player Alliance Aviation didn’t get a tap on the shoulder either.

AFR is also reporting that the administrator has been doing a bit of matchmaking between those who want an equity stake, and those intending to inject some debt into the company.

2PAXfly Takeout

The aviation industry has a difficult road ahead when it comes to sustainability. It’s going to require a relative revolution in technology, with ‘electric planes’ or hydrogen planes, or some form of jet engine that doesn’t require a carbon based fuel. And that is going to require the development of an alternative to jet engines probably.

It’s a big ask. It will take time to develop.

This move to home grown and manufactured SAF is a first step – maybe even a baby step in a very long road of innovation. In the long run, US$200 million won’t even touch the sides.

Well at least now we know. Lawyers and banks will have earned a bunch of fees over the weekend, as jockeying for position was apparently long and hard.

It appears that Virgin Australia management is keen to stay on, and stay with their business model of a full service airline with a domestic fleet, and still maintaining some international destinations. On the other hand, leaks from the bidding process indicate that at least some, if not all of those final four are looking at a slimmed down operation, maybe budget, and mostly without an international presence.

The current management team is expected to present a Virgin V2.0 pitch in the next week, their chance to convince the winning bidder to stay with their full service domestic and international vision.

That’s what I would favour, as I think it is the best outcome for the public. But with everyone from Ryan Air through to Emirates expecting a long slow recovery, maybe the budget domestic option is the way to go.

Next round due on June 12, with a deal to be done before June 30

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