Virgin Australia would continue to operate an international network flying to Los Angeles and Tokyo under a confidential management plan put to prospective buyers ahead of a Friday deadline for preliminary bids for the airline.
Two sources close to negotiations, who spoke to The Sydney Morning Herald and The Age on condition of anonymity given the strict non-disclosure agreement signed by those involved, said a resurrected Virgin would also fly to New Zealand, Bali and Fiji under the plan put to interested parties by the airline's management.
The airline's directors put the company into administration last month after it failed to pull off a restructure. Virgin, like airlines around the world, has shut down the vast majority of air travel as a result of COVID-19 travel restrictions.
Virgin would keep international flights under a plan put forward by management.Credit: AAP
The plan is contained in an information memorandum distributed to key bidders by the airline's administrators, Deloitte, on Monday. Virgin's administrators have told potential buyers the airline could more than triple annual earnings - to $1.2 billion - in the 2022 financial year, the first following the coronavirus outbreak. The Australian Financial Review last week reported bidders had been told to expect revenues of $5 billion in that year.
But Virgin's plans for an international flight network will be at odds with the interests of some interested buyers who want the airline to return to its roots as a low-cost domestic carrier. Under former chief executive John Borghetti, Virgin expanded to become a full-service airline as it tried to take on rival Qantas. The airline's current chief, Paul Scurrah, had moved to cut costs before calling in administrators on April 20.
Most recently, one of India's largest airlines - low-cost carrier IndiGo - has put together a proposal which, if successful, would turn Virgin into a budget operation once again. Other interested parties include mining magnate Andrew Forrest and international outfits Bain Capital, Oaktree Capital Management and Brookfield.
Those sources close to discussions told the Herald and the Age the annual $1.2 billion earnings figure forecast by Deloitte is reliant on Virgin remaining a full-service airline. Pulling out of international routes would also mean forfeiting hard-to-secure and valuable gate slots at major airports, they said. Virgin had only recently secured a slot at Tokyo's Haneda Airport before the pandemic shuttered international travel.
The airline's routes to Hong Kong, however, appear unlikely to return.
A Virgin spokeswoman declined to comment on Tuesday. But minutes of Virgin's first creditors' meeting, held on April 30, show Deloitte partner Vaughan Strawbridge told the airline's creditors he wanted to "avoid breaking up and selling parts of the business". “The best outcome for everyone is the preservation of the whole business," he said, according to a copy of the minutes lodged with the corporate regulator on Monday.
"The chairperson advised that the administrators' discussions with government will remain important in the coming weeks and noted the state and federal governments' various public statements in recent days," the minutes read. "Key to those discussions will be the important contribution Virgin Australia makes at a state and national level, not only through jobs but also through competitive domestic airline services, connections to overseas destinations and helping to support passenger growth in regions and regional tourism sectors."
The federal government has recently used Qantas and Virgin to fly Australians stranded overseas due to the coronavirus pandemic, underwriting any loss for the airlines in flying empty planes to four key destinations and paying for any shortfall if airfares did not cover the cost of the returning flights.
Deloitte is being advised by investment banks Morgan Stanley and Houlihan Lokey during the sale process.