Virgin bidder looks at budget and full service model

One of the bidders vying to take over Virgin Australia has revealed a plan to turn the troubled company into a ‘hybrid’ airline – and this is what that plan might look like.

VIRGIN Australia could be reborn as a cross between a budget airline and a more traditional full-service carrier as it attempts to compete against Qantas.

Bain Capital, the US-based private equity group that is bidding for the troubled airline, says it’s considering relaunching Virgin as a “hybrid airline,” sitting between a full-service and a low-cost carrier.

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The plan comes as Bain and three other bidders have been asked by Virgin’s administrator Deloitte to submit “second-round” indicative bids by Friday night ahead of the shortlist being cut to two over the weekend.

The other bidders are BGH Capital and AustralianSuper; New York-based Cyrus; and Phoenix-based Indigo Partners, which is partnering with Oaktree Capital Management.

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Bain Capital’s Sydney-based managing director Mike Murphy told the Australian that under the plan Virgin would continue to fly regional routes and internationally in future, with the potential backing of Sir Richard Branson’s.

The Brisbane-based airline was considered a cheeky upstart when it began flying in 2000 under the Virgin Blue banner. It changed its name to Virgin Australia in 2011 and last month called in voluntary administrators Deloitte with debts totalling almost $7 billion.

RMIT government and business relations expert Warren Staples said bids for Virgin were rumoured to be in the $3.5 to $4 billion range.

Mr Staples said that in the face of a coronavirus decimated global aviation industry, the bidders have pitched much smaller operations than the 130 planes Virgin Australia had flying.

Virgin check in at Brisbane International Airport. Photographer: Liam Kidston.

“There seems to be consensus around a more pared back strategy, and this will result in some pain for current Virgin employees,” said Mr Staples.

“One bidder, BGH, appears to have pitched a small start-up fleet of 15 operational planes, but seems to have largely aspirational goals about where that can grow to.

“The other bidders seem less bullish. Regardless of who is ultimately successful this is likely to mean that regions and tourism are going to be hit hard, and this reboot will not be a serious competitor for Qantas.”

- with The Australian

Originally published as Virgin bidder looks at budget and full service model