More than two months after private equity outfit Bain Capital was provisionally handed the keys to Virgin Australia, creditors gave the final tick of approval to the sale in Sydney on Friday morning. As a result, the airline has new owners and will keep on flying.
“This outcome provides certainty for employees and customers, a return to creditors, opportunities for suppliers and financiers to continue to trade with the Virgin Australia Group as well as maintaining a competitive Australian aviation industry for the benefit of consumers,” said Vaughan Strawbridge, the Administrator from Deloitte who guided the sale process.
Creditors give Virgin Australia sale the green light
When Virgin Australia collapsed in April, it left over 10,000 creditors out of pocket. The bulk of those creditors were employees, and the fate of Virgin Australia lay in their hands. While Deloitte okayed the sale of the airline to Bain Capital, the final say lay with the creditors. Today, the vast majority of the creditors voted in favor of the sale.
Ten separate deeds of company arrangement were accepted by the creditors today. They will be signed and completed within 15 business days. When this occurs, ownership will cede to Bain Capital, and existing companies and corporate structures will get liquidated.
The previous owners, including the Virgin Group, Singapore Airlines, and Etihad, will have all done their dough.
Unions onboard as majority of employees keep their jobs
Union leader Michael Kaine said today’s vote represented a new beginning and an important day for Australian aviation. He noted there was a long road ahead and vowed to hold Bain Capital accountable for its promises. Those promises include the payment of all monies owing for worker entitlements and continued employment for the majority of employees. Despite this, some 3,000 employees will lose their jobs.
In a statement provided to Simple Flying, Virgin Australia CEO, Paul Scurrah said;
“This is an important outcome for Virgin Australia, which brings us closer to exiting administration and allows us to focus on the future.”
Where to now for Virgin Australia?
Exactly where that future lies is the subject of some speculation. Mr Scurrah moved to hose down that speculation in an interview at the CAPA Centre for Asia Pacific Aviation Summit earlier this week. He said most passengers wouldn’t notice many differences between the new Virgin Australia and the old Virgin Australia.
“We intend to be our own version of an airline,” he said. “We will be a very similar product to what people have experienced in the past. I think the difference is the simplification of the business.
“We’ll have a two-class cabin; we’ll have a series of high-quality lounges. We have Velocity with 10 million members who are quite loyal to us, so that gives us a flying start.”
Frills likey to be trimmed as Virgin Australia chases profitability
Throughout the airline’s time in receivership, Virgin Australia continued to fly. Schedules got slashed, and many destinations were abandoned, but Virgin Australia stayed in the air. In the future, Virgin Australia will have a reduced fleet comprised solely of Boeing 737-800s. When demand rebounds, Paul Scurrah would like to have around 75 planes in the air.
What passengers won’t see are any more widebody aircraft on the transcontinental routes, so wave goodbye to those lie-flat seats and morish raspberry brownies in Virgin Australia’s top tier widebody business class cabin. But those frills won’t necessarily matter as much in the future. In the same interview, Paul Scurrah said Virgin Australia would not be chasing the corporate dollar as hard as they previously were.
Today’s meeting brings some closure to the many Virgin Australia employees whose future was uncertain. The workforce will get trimmed, but more employees are keeping their job than initially expected. That’s a good outcome. As regular Virgin Australia passengers will tell you, the best asset Virgin Australia had was their cheery cabin crews and helpful airport staff. Keeping them in place is a huge step in the right direction.
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