Virgin Australia: New bidder! Have they missed the deadline?

The SMH and the AFR are reporting that Brookfield, Canadian based asset manager, previously in the race, and then out because they couldn’t get enough information and the process was paced too fast, have apparently entered a very late bid – a couple of days before the administrator Deloitte is going to bring the shortlist down from 4 to 2.

Background

Brookfield walked away from the process before the end of the last round requiring indicative bids, claiming they were not confident Virgin Australia could last with its current funding until the purchase deal was approved by creditors in August. It also felt the administrators were not making sufficient information available to them prior to their indicative bid, and I think there was some argy-bargy over a confidentiality agreement.

Where does this leave the bids and the process

Deloitte is going to have to decide whether they will admit the late bid, and the other bidders will be weighing the pros and cons of legal action. Cue lawyers feeding frenzy.

It’s reported that Brookfield is the favourite of the unions representing Virgin Australia employees. Brookfield is seen to have a track record of sticking with its investments for the long haul, instead of the ‘churn and burn’ reputations of some other investors.

We don’t know what their approach to managing the airline will be, but I speculate it is towards the maintain it as a full-service airline, as this is the most likely approach to gain union support. We do know that Cyrus Capital has a similar view, while Bain, through its CEO’s BOSS profile, has indicated a more likely return to the Virgin Blue – low-cost model.

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.

Hold onto your hats boys and girls. This Virgin Australia ride just hit its first pile of turbulence. Probably not the last, either.