Sir Richard Branson pressing for 10% stake in Virgin Australia

Virgin Australia’s new owners appear reluctant to take on partners in the airline, as Richard Branson presses for a 10pc stake.

Virgin Australia CEO Paul Scurrah at the airline’s new headquarters at South Brisbane. Picture: Lyndon Mechielsen

Virgin Australia’s new owners are playing hardball with would-be investors keen for a slice of the reborn carrier, with even Richard Branson facing a battle to get what he wants.

The co-founder of the Virgin brand and owner of the Virgin Group, wants a minimum of 10 per cent in Virgin Australia plus a board seat, and has the capital ready.

However US private equity firm Bain Capital is understood to be willing to hand over just 5 per cent, as it prepares to become the outright owner.

The Boston-based firm made a total commitment of $3.5bn for the airline which went into administration in April with debts of $6.8bn.

Under the deal, all 8.45 billion shares in Virgin Australia will be transferred to Bain with the company expected to take the airline off the ASX.

On Monday the Queensland government confirmed it had signed a deal for a $200m investment in Virgin with the condition the airline remain headquartered in the state for the next 10 years.

Sir Richard Branson. Picture: AFP

The funding includes $20m worth of equity which will give the government a 2 to 3 per cent stake, a loan to provide working capital, and other financial support.

Queensland Treasurer Cameron Dick said the state’s return on investment would be about 7 per cent over the duration of that agreement.

“We worked very hard to do what we wanted to do, to ensure we had a second national airline, to provide competition and keep the air fair and to support regional communities that are so dependent on competition in aviation,” Mr Dick said.

Several other investors in Bain Capital’s funds were also believed to be competing for a stake in the carrier, and a spokesman confirmed a number of discussions were underway. The Virgin Group was also expected to secure a deal for the continued use of the trademark worth an estimated $15m a year to Branson.

The sale to Bain is due to be finalised by the end of the month, denoting the end of the airline’s administration.

A final hurdle surrounding the return of leased aircraft and parts is still to be resolved, with administrators Deloitte awaiting the outcome of their appeal in the Federal Court.

Deloitte challenged a ruling made in favour of lessor Wells Fargo which would have seen administrators bear the cost of transporting four Boeing 737 engines to the US.

The administrators feared the ruling would result in a flood of demands for Virgin to do the same for the lessors of 78 other aircraft and engines, in line with their original contracts.

The Full Court of the Federal Court issued a stay order last month on the original judgment ahead of a ruling expected in coming days.

Under Bain, Virgin was expected to become a much leaner operation with about a third of its 9000-strong workforce set to go, along with almost half of the airline’s fleet of 100 aircraft.

Discussions are being held with unions who have raised concerns that members are facing the prospect of much-reduced wages and conditions in the post-COVID environment.

Flight attendants claimed they were under pressure to do 15-hour work days, while pilots were looking at pay cuts of up to 40 per cent.

Virgin Australia recently relocated its headquarters from the Virgin Village at Bowen Hills to four floors of an office tower at South Brisbane. About 1000 employees are expected to work out of the offices following a significant reduction in corporate staff.