How will the new Virgin Australia shape up?

Virgin is set to confirm retaining business lounges, the eventual resumption of international routes, and the demise of Tigerair.

The future of Virgin Australia’s lounges such as this one in Melbourne should become clearer on Wednesday. Picture: Supplied.

Virgin Australia will divulge more details of how the airline will look post-administration on Wednesday, with management expected to confirm the retention of business lounges, the eventual resumption of international routes and the demise of Tigerair.

CEO Paul Scurrah will deliver the update to the ASX and the media, following weeks of speculation about the airline’s future after its sale to US firm Bain Capital.

Virgin Australia went into administration on April 21 with debts of $6.8bn, triggering a race to find a suitable buyer.

After an accelerated process, administrators’ Deloitte named Bain as the successful bidder on June 26.

Details of the sale agreement were subject to a court-approved confidentiality clause and will only be released to creditors later this month.

Although Bain’s Australian CEO Michael Murphy provided some clues as to how Virgin Australia would operate when it emerged from administration, questions remained over the size of the carrier including its fleet, network and workforce, and its position in the Australian market.

Like most other airlines rocked by the COVID crisis, Virgin Australia was expected to be a much leaner operation in the years ahead with about 50 fewer aircraft and between 5000 and 6000 employees, down from more than 9000.

In response to the more streamlined workforce, the airline’s Brisbane-based headquarters was set to relocate from its sprawling complex at Bowen Hills next month.

Employees will instead be accommodated over five floors of the Southpoint building at South Bank, which also houses travel company Flight Centre.

Closer to a full service carrier

Despite Bain’s insistence Virgin Australia would not compete directly with Qantas, the airline was still likely to be closer to a full service carrier than a Jetstar.

That news could disappoint Qantas CEO Alan Joyce who last week told a function on the Gold Coast he expected Virgin Australia “to move back down-market to where Virgin Blue was”.

“That will give Qantas more opportunities,” he said.

Inquiries about the reopening of Virgin Australia lounges have consistently been met with “that’s under review” but The Australian understands the airline will retain the feature for top tier members of its Velocity loyalty program.

International routes to destinations such as New Zealand, Bali, the US and Japan are also expected to make a comeback when the COVID crisis eases.

Low cost carrier Tigerair will not return to the skies, and Virgin is also tipped to cover off on its regional airline which has been the subject of recent court hearings.

Deloitte was forced to apply to the federal court to be appointed as voluntary administrator to the entity that owned Virgin Australia Regional Airlines, VAH Newco 2, which had been among about 15 companies in the group listed for liquidation.

In a situation likened to “shutting down the wrong engine”, it was discovered that far from having no assets or liabilities, VAH Newco 2 was the 100 per cent shareholder of VARA and the guarantor for almost $1bn in unsecured debt.

Last Friday, Federal Court judge John Middleton granted the application.

Virgin Australia has continued to fly throughout the administration, albeit on a much reduced basis with most flights subsidised by the federal government as part of a minimal domestic network.

On Tuesday, services between Brisbane and Hamilton Island resumed as part of the staged ramp up of domestic flights.

By mid-September the airline expected to be operating seven intra-Queensland routes.