Virgin Australia collapse: Chinese-backed firm asking for bail-out paid high price for Aussie airport check-in business

The Chinese owners of bailout-seeking airport services company Swissport expanded to Australia by paying about 150 per cent more for market leader Aerocare than it was worth just three years earlier.

• Richard Branson blasted over ailing airlines
• Billionaires behind Virgin won’t bail it out

The Chinese owners of bailout-seeking airport services company Swissport expanded to Australia by paying about 150 per cent more for market leader Aerocare than it was worth just three years earlier.

The Daily Telegraph has learned Swissport outlaid more than $500 million to acquire Aerocare — Australia’s largest baggage handling and check-in provider — from local private equity firm Archer Capital in 2017. The purchase price was previously unknown.

Virgin Australia’s Gold Coast check-in sat empty on Wednesday.

Three years prior, Archer had snapped up Aerocare for little more than $200 million.

Swissport is owned by HNA, which is a 20 per cent shareholder in beleaguered Virgin Australia.

Swissport is seeking a $125 million bailout from the federal government, saying it will sack 2000 of its 2500 workers if it doesn’t receive taxpayer help.

Its request comes after Virgin unsuccessfully sought a $1.4 billion loan from the Commonwealth.

It can also be revealed Swissport and Virgin Australia recently engaged the same debt restructuring firm.

Open to listening. Deputy PM Michael McCormack. AAP Image/Mick Tsikas

HNA has been trying to sell the global Swissport operation for $US2.3 billion ($3.7 billion), which is $US500 ($800 million) less than it paid a Paris-based private equity firm in 2016.

Swissport is due to hold talks with Deputy Prime Minister Michael McCormack on Friday.

Union leaders are urging the government against providing assistance unless labour practices improve.

Swissport told The Daily Telegraph the increase in Aerocare’s value between 2014 and 2017 was due to business growth, including new airline contracts, acquisitions and intellectual property development.

The operation had less debt now – $165 million – than under Archer, Swissport said.

Virgin Australia collapse: Shareholder HNA’s Swissport also seeks bailout

On Wednesday, Zurich-based Swissport threatening to sack 2000 Australian workers — mostly baggage handlers and check-in staff — unless it gets $125 million from taxpayers.

Swissport went public with its demand – accompanied by a spreadsheet of at-risk staff broken down by federal electorate – as it sought to apply maximum public pressure.

The Daily Telegraph can reveal its local subsidiary, Swissport ANZ Pty Ltd, is a guarantor on close to $1.4 billion of group loans following a refinancing deal last year.

Prior to that, it stood behind more than $1 billion of its parent’s debt, much of it at an eye-watering 9.75 per cent.

Big loans are a hallmark of HNA, with the company carrying borrowings of $US94 billion ($149 billion) at the end of 2017 after purchases including a computer distributor, hedge fund, a stake in Deutsche Bank New York real estate. It began in the 1990s as a shareholder in China’s Hainan Airlines.

HNA, which bought Swissport in 2016 and owns 20 per cent of Virgin, is said to be the most indebted non-financial company in Asia.

It claims its largest shareholder is its charity arm, but at one point Bank of America refused to do business with it due to ownership opacity.

Virgin Atlantic boss Sir Richard Branson with model Kate Moss in 2009. Picture: Getty Images

In February HNA asked government officials in China’s Hainan province to help resolve its debt crunch.

Swissport’s Australian operation was profitable leading into the coronavirus crisis, said Swissport executive vice president Asia-Pacific Glenn Rutherford. It has $165 million of debt, on which it pays 6.9 per cent interest.

HNA’s situation had “no bearing on the actions we are taking locally,” he said.

And despite the federal government refusing to bail out Virgin, which is 90 per cent foreign-owned, Mr Rutherford said “I expect we will receive some support.”

Transport Minister Michael McCormack last night told The Daily Telegraph he would hold a teleconference with Swissport on Friday.

“I’m happy to hear them out,” said Mr McCormack, who is also Deputy Prime Minister.

However, he noted the precedent set when the government said it would not bail out foreign-controlled Virgin.

“You can’t apply one principle to Virgin and a different principle to another company in the same industry,” Mr McCormack said.

Swissport said if it did not get the money it was also likely to liquidate assets at airports including Newcastle, where it handles all the ground services for Virgin.

That would be bad news for the region, said Newcastle Airport CEO Peter Cock, because there would be only one provider left. That would push up prices for regional flights, Dr Cock said.

Virgin CEO Paul Scurrah told ABC Radio “providers like Swissport are very, very important to getting us back up and running.”

Virgin’s administrator Deloitte’s Vaughan Strawbridge said yesterday there was “huge” interest in the airline that was “increasing as the days unfold.”

Those said to be connected to possible offers include Australian private equity firm BGH Capital, fund manager MLC, airline investors Indigo Partners, US distressed asset specialists Oaktree Capital and Sir Richard Branson, who already owns 10 per cent of Virgin.

Mr McCormack criticised the high-profile billionaire for failing to help.

“Until Tuesday, I hadn’t heard him say anything,” Mr McCormack said.

Deloitte sent a flyer to potential buyers on Tuesday night that highlighted Virgin’s position in the Sydney, Melbourne and Brisbane markets.

The airline had “strategically valuable access to routes and slots in the ‘Golden Triangle’, historically one of the most profitable operating jurisdictions globally for air travel,” Deloitte said.