Bain Capital reads riot act to unions over Virgin Australia board

Virgin Australia’s prospective new owners have warned unions they will not get a say in who is on the airline’s board of directors.

Virgin Australia aircraft parked at Brisbane Airport. The airline could soon emerge from administration under new owners Bain Capital. Picture: Patrick Hamilton/AFP

Unions hoping to use their numbers to keep Jayne Hrdlicka off the new Virgin Australia board have been told in no uncertain terms that they will not get to choose the directors.

In a letter to union leaders, prospective new owners Bain Capital tackled the issue head on, stating that the firm would “decide on and form a board of high quality, experienced directors”.

“As with all of our investments, we will recruit the best combination of people to serve on Virgin Australia’s board of directors based on the needs of the business,” said the letter from Bain Capital’s Australian CEO Mike Murphy. It followed strong indications by the Transport Workers Union that their support for the $3.5bn sale to Bain Capital could be withdrawn if Ms Hrdlicka was given a board position.

The former Jetstar CEO had a troubled relationship with unions while employed by the Qantas Group, due to a 2015 wage freeze.

On Sunday TWU national secretary Michael Kaine said they were keen to ensure that the type of “spiteful leadership” currently on display at Qantas with regard to the outsourcing of ground handlers was not adopted by Virgin Australia.

“Governance remains critical to building Virgin back up as a strong second airline,” Mr Kaine said. “As has been stated, Virgin’s sale is more than a narrow commercial consideration and the board must recognise that staff are critical to this mission and emphasise co-operation rather than confrontation.”

In an effort to appease unions, Mr Murphy said Bain would set up an advisory council at Virgin Australia to receive the input of key union leaders.

The council would be made up of senior management, Bain representatives and three union officials, and meet fortnightly until the end of the year.

Bain Capital Australia chief executive Mike Murphy. Picture: John Feder

“We see this confidential forum as an opportunity to discuss key matters that go to the heart of Virgin’s recovery including how we can secure long-lasting employment for as many Virgin people as possible,” Mr Murphy wrote. “Such an advisory council is a unique step in corporate Australia. We believe that none of Australia’s top 50 companies has an advisory council that functions in this manner.”

The council’s establishment was reliant on the sale to Bain Capital going ahead in the form of a deed of company arrangement (DOCA), which will be voted on by creditors on Friday.

Unions will vote on behalf of their members, who make up much of Virgin Australia’s 9000-strong workforce.

Jayne Hrdlicka. Picture: Stuart McEvoy

Some, including the Australian Licensed Aircraft Engineers Association and Australian Federation of Air Pilots, have confirmed they will support the Bain DOCA.

But the TWU was continuing “to hold mass meetings with Virgin workers to consult them”.

Mr Kaine said the advisory council was a pleasing initiative which would give unions more say on the airline’s direction.

“We will work within this council to ensure workers have a say in who is on the board and the direction the board takes,” he said.

Mr Murphy reaffirmed to union leaders that Virgin Australia would have a workforce of about 6000 under Bain, and continued access to JobKeeper as long as the DOCA was supported.

In the event the DOCA was voted down, he said Bain had agreed to complete the transaction via an asset sale which would mean “a prolonged period of uncertainty for employees”.

That was due to the “sheer volume of contractual arrangements that would need to be transferred as part of the sale … and the potential loss of JobKeeper payments”.

“Moreover, an asset sale increases the risk of liquidation due to the complexity of the closing steps required to complete the transaction,” Mr Murphy said.

Virgin Australia went into administration on April 21 with debts of $6.8bn.