More mayhem to come for Virgin?

Qantas CEO Alan Joyce (right) and Virgin Australia CEO Paul Scurrah at the National Press Club in Canberra last year. Picture: Getty Images

Now Bain is ensconced in pole position for Virgin, the best chance for unsecured creditors like the bondholders to improve their deal is to create as much mayhem as possible.

Qantas boss Alan Joyce did his best to help them with Thursday’s job cuts announcement, designed to put maximum pressure on the new owners of Virgin.

The package was unveiled, as always, with Alan Joyce having multiple audiences wrapped around the simple reality of tough decisions aimed at preserving Qantas’s future.

Canberra was one target, with Qantas highlighting the 6000 job losses just to bring the politicians up to date with business reality in the hope of convincing them to extend their hand outs.

Mike Murphy at Bain was another target, which is why Joyce said he didn’t figure international would open until July next year.

The truth is no-one, including Joyce, knows when that is actually going to happen. But best to create the impression he will be putting maximum focus on domestic flying, which is where Virgin has 30 per cent market share and the place where they battle most fiercely with Qantas.

Former Herbert Smith Freehills partner Tom Nestel and Lachlan Edwards are advising the bond holders and they’d know their best chance of maximising the payout is to create as much uncertainty as possible.

Bain’s Murphy just wants to wrap up the deal between now and August 22, so he is at his most vulnerable right now.

He will wrap himself around Virgin’s Paul Scurrah because that is the best way of getting the unions on-side. But the union awards are one many cost disadvantages he faces and will want to iron out before the real battle against Joyce begins.

Murphy, it should be noted, has expressed confidence in Scurrah but in interviews with this column last week stopped well short of endorsing him as the long term boss.

But that’s an uncertainty which can be cleared up later. The aim now is just to get the deal done.

Worker support will be enough to get Bain across the line in the creditor vote so the bond holders will need to do whatever they can to try to muddy the waters.

Ideally, they’d want bond holders to head the committee of inspection which advises the administrator on the process. It‘s a role which would provide a platform to create uncertainty.

But there are other opportunities.

Bain wants to simplify the Virgin fleet, with as few different types of aircraft as possible to cut costs and a deal needs to be done with Boeing.

Then there is Gate Gourmet, Wi-Fi provider Gogo and others who are all on the Bain to do list.

The game plan is to have a joint press conference between the administrator and Bain to present a united front.

Meanwhile Bain rival Cyrus is understandably furious, claiming Strawbridge simply stopped taking calls, perhaps thinking Bain was financially stronger.

If he had concerns about Cyrus, these could have been ironed out earlier. And if the plan was to present two strong bids, then the BGH-Australian Super team was the obvious choice.

Bain has played its cards superbly, taking the high profile route to explain its merits – a method which was at first scoffed at by rivals as showing inexperience.

Bain’s Murphy has proved the naysayers wrong.

If he can cut good deals between now and the creditors vote on August 22, then just maybe a Bain controlled Virgin will be in better financial shape than the Qantas behemoth.

That would be a boon to Australian consumers.

But there are plenty of deals to do before we can call that game. The potential roadblocks like the bond holders have the incentive to create mayhem between now and then.