Make Virgin Australia fun again, suitor Bain Capital says

Bain says it wants to create ‘an airline for all Australians’, as the TWU pushes for JobKeeper savings to be injected into Virgin.

Virgin Australia aircraft are seen parked on the tarmac at Brisbane International airport. Picture: AFP

Virgin Airlines bidder Bain Capital has promised to “make flying fun again” with an airline “for all Australians”, as it and other short-listed bidders prepare to make second-round proposals for the airline to be submitted on Friday.

Bain Capital’s Sydney-based managing director, Mike Murphy, said on Sunday that Bain would be submitting a second-round proposal to the administrator, Deloitte’s Vaughan Strawbridge, this week as part of its plans to “bring back the best part of the Virgin Blue culture and make flying fun again”.

His comments come as the Transport Workers Union — representing Virgin employees, who are one of the airline’s largest groups of creditors — has called on the federal government to use some of the $60bn saved from its proposed JobKeeper program to help assist Virgin at a critical time in its bid for survival.

TWU national secretary ­Michael Kaine called on the government to empower former Macquarie Group chief executive Nicholas Moore to negotiate some financial assistance and government guarantees for the airline to make sure the groups showing interest in Virgin did not drop out of the race.

“Nicholas Moore is strutting around like a sheriff without a badge,” Mr Kaine said.

“He has been seeking information from the bidders and making pronouncements, but he doesn’t seem to be contributing anything to the process.

“People have been asking questions about what his role really is. The government should give him a cheque book and get on with it.”

Deloitte last week narrowed down the field of contenders for Virgin to four short-listed parties: a consortium involving BGH Capital and the $170bn AustralianSuper; Bain Capital; and two US bidders, New York-based Cyrus and Phoenix, Arizona-based Indigo Partners. Canadian infrastructure investor Brookfield, which was not part of the shortlist as a result of its concerns over aspects of the bidding process, has also continued talks with the administrator.

Mr Kaine said it was clear there were interested bidders for Virgin but it was urgent that the government step in to provide them with some certainty as they had no way of assessing the airline’s financial future, which would be affected by government decisions such as opening up the borders.

“The bids will fall away if it (the federal government) doesn’t give them some certainty,” he said.

“Now there is interest from bidders, the time has come to give them some certainty of government support. I fear that without government support, buyers will do their due diligence but won’t go through with their bids as they don’t know what the cash burn will be.”

Shortlisted bidders for Virgin Australia have been asked to submit “second-round” indicative bids by the end of this week, as the administrator moves to cut the list of suitors going through to the next stage of negotiations.

While binding offers are not due until June 12, The Australian understands that the administrators want to slim down the shortlist for the airline from the current four, given the complexity of ­negotiations with a range of parties going forward.

The administrators will assess the second-round proposals and make a decision next weekend, with the slimmed-down shortlist to be confirmed early next week.

Expectations are that the shortlist could go down to two following a review of the second-round bidders next weekend.

But there is also the prospect of outsider Brookfield returning to the negotiating table at some point, to potentially produce a shortlist of three. All four shortlisted bidders are expected to lodge second-phase proposals by the end of the week.

Bain Capital confirmed on Sunday that it was preparing a “second-round proposal to become the owner and operator of Virgin ­Australia”.

“Bain Capital brings experience, certainty and stability to Virgin with a long-term mindset and a commitment to a well funded, successful airline,” it said.

Mr Murphy said Bain had the depth of experience to help steer Virgin through its current turbulence “so that together with the staff, Australia can have a safe, ­financially strong airline which serves the interests of all Australians and meets the needs of hundreds of thousands of Australians who work in the tourist industry.”

Bain is pitching itself as a serious, well-funded owner of Virgin with a plan to revive the spirit of the original Virgin Blue. “It will be an airline for all Australians, with Australian management and staff, funded by significant Australian money and Bain Capital which has been investing in Australia for more than 20 years,” it said.

Mr Murphy said Bain would be a committed partner for Virgin as it had a “proven track record”.

Bain is being advised by Melbourne-based airline and restructuring experts KordaMentha, and former Jetstar chief executive Jayne Hrdlicka.

Mr Murphy said Bain had the “strongest capital base of any of the bidders”, which would be critical in ensuring its long-term survival.

“We know aviation isn’t going to return to normal any time soon, but Bain Capital is here for the long haul with deep funding to navigate these difficult times.”

The long-term commitment to operating Virgin as a viable middle market airline which is not a low cost carrier is a critical issue for Virgin’s 10,000 staff and the TWU. The employees are concerned that if Virgin is taken over by bidders who turn it into a purely low cost carrier it would be vulnerable to intense competition from Qantas through its dual arms of Qantas and Jetstar.

Mr Kaine said the low cost model was not in the best interest of workers, nor the long-term survival of the airline.

“Virgin was in the right space in the Australian market (before it went into administration),” he said.

“A kind of value plus airline which was between being a low cost carrier and the top of the market.”