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Virgin Australia 3.0: Exits Administration & Stock Exchange. New Management. New Owners.

Virgin Australia 3.0: Exits Administration & Stock Exchange. New Management. New Owners.

Today marks the end of Virgin Australia as a public company listed on the Australian Stock Exchange. It also marks the end of the voluntary administration period and the end of Paul Scurrah’s short period as CEO. As the new owners, Bain Capital and a new CEO, Jayne Hrdlicka take over the reins of the downsized now only domestic airline.

“While the outcome of the process is extraordinary, as Administrators we do acknowledge it has come at a cost for many Virgin Australia employees who have lost their jobs, and suppliers and creditors who will not receive all of the monies owed to them and investors who will receive nothing.”

Vaughan Strawbridge, lead administrator Deloitte

Background

As one of the first major corporate victims of the COVID-19 pandemic, Virgin Australia went into administration in April 2020, appointing Deloitte as the voluntary administrator. Serious bidders for the airline numbered 4, and Bain Capital was chosen by Strawbridge and his team as the preferred bidder at the end of June and Bain entered a deed of company arrangement (DOCA), as the first step in buying the company. The sale was approved in September by the combined 10,000 creditors (mainly staff) who are/were owed around AU$7 billion.

New beginning

As a result of Federal Court approval, Virgin’s equity was transferred to Bain today, with no reimbursement to shareholders, meaning airlines like Singapore Airlines, Richard Branson’s Virgin Group, HNA and Etihad got not a cent. Unsecured creditors are expected to receive anything between 9 and 13 cents in the dollar. Virgin Group is still in negotiation for a combination of a stake and license fees for the use of the Virgin brand.

Despite giving assurances that the existing management would be maintained, Bain has installed one of their own and former Qantas/Jetstar manager, Jayne Hrdlicka as the new CEO. Whereas former CEO Paul Scurrah had a vision of Virgin maintaining its existence as a full-service airline, Hrdlicka’s background is in budget. This has led to a new ‘value-based’ proposition for the airline, although Hrdlicka has not revealed her specific plans, so we don’t know exactly the fate of services like lounges and business class and in-flight catering.

2PAXfly Takeout

These are hard times for airlines in Australia and worldwide, a fact that has been amply demonstrated this week, with domestic travel being opened up one day as Australian states dropped their border restrictions, and then closed down the next with border restrictions reimplemented because of a small COVID-19 outbreak centred around a worker from a medi-hotel in Adelaide, South Australia.

This bouncy castle of uncertainty appears to be the new normal in Australian aviation. Talk about being nimble – airlines are having to change strategy on the head of a pin.

Mind you, that does not seem to dent the fascination for shareholders of owning a domestic airline. Tiger Airways may have gone and Virgin Australia might be wounded, but there is already another player heading for the airfield, and maybe two. Regional Express (REX) have taken possession of their first 737-800 (ex Virgin) ready to launch their assault on the capital city domestic market from March 2021, and Alliance Airlines has expressed interest in expansion as well.

New players and an unpredictable pandemic are going to make for an interesting future for Australian aviation.

Standby.

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