NSW fights for Virgin footprint as ‘Maroons repel charge’

The NSW government is continuing talks with Virgin’s bidders despite news that both will retain Brisbane as the airline’s base.

The NSW government is continuing to talk with Virgin Australia’s bidders about expanding some of Virgin’s footprint in the state. Picture: AFP

The NSW government is continuing its talks with Virgin Australia bidders, New York hedge fund Cyrus Capital and Bain Capital, despite news that both bidders will retain Brisbane as the airline’s head office.

While it appears that both bidders have reached a deal over the weekend with the Queensland government to maintain the airlines headquarters in the state in return for a potential $200m investment, the NSW government is continuing to talk with both parties about expanding some of Virgin’s footprint in the state.

“The NSW government appointed (former Macquarie Group executive) Michael Carapiet, to look at options for Virgin’s operations to be based in NSW,” a spokesman for NSW Treasurer Dominic Perrottet told The Australian on Tuesday.

“We remain engaged with all parties, including the administrators and remaining bidders. “A more competitive aviation industry is vital for Australia and will ultimately benefit consumers.”

While the Queensland government announced in May it would be prepared to put up some $200m towards a bid for Virgin which would retain the airline’s headquarters in Brisbane, it is believed that the NSW government upped its ante in the discussions over the weekend.

It appears that Queensland then responded to the offer by sweetening its incentives.

“The Maroons repelled the charge,” one source told The Australian on Tuesday.

But the NSW government said on Tuesday that it was still talking to all parties. Sources close to Cyrus confirmed that it had reached a deal with the Queensland Investment Corporation on the weekend, but it appears that rival Bain may be more open to last-minute offers from NSW.

Meanwhile, the main union representing Virgin Australia’s 9000 workers has given a cool reaction to an improved offer by Bain for the airline’s employees.

The Transport Workers’ Union has called on both bidders to put their commitments to Virgin staff in writing as administrator Deloitte’s Vaughan Strawbridge continues talks ahead of next week’s decision on the “preferred” bidder.

“We welcome any indication from the bidders that they have the interests of workers foremost in their approach,” TWU national secretary, Michael Kaine, told The Australian on Tuesday.

But he said any commitments by the rival bidders about the preservation of entitlements and future benefits for Virgin’s 9000 staff would need to be made in public and put in writing.

“Words will need to be backed up by written commitments and conduct in the future,” he said.

Mr Kaine’s comments come as unnamed sources connected with the Bain bid said it would give equity in the airline to Virgin staff who remained with the business after a major restructuring, if it were chosen next week as the preferred bidder.

Mr Strawbridge is currently scheduled to choose the preferred bidder by next Tuesday.

Bain sources briefing journalists this week also indicated its bid would be committed to fully funding the entitlements of any workers who will be made redundant if it took over the airline. The move was seen as an effort by Bain to win over crucial union support following moves by two other unions to publicly support the rival bid by Cyrus which is seen as being potentially more sympathetic to employees.

But unions representing Virgin’s workers have reacted coolly to the proposed offer.

Both bidders are expected to cut back Virgin’s existing workforce and operate with a reduced fleet of aircraft but neither has given any specific commitment on how many staff will remain after they take over and go ahead with an expected restructuring.

The TWU has yet to make a commitment on which of the two rival bidders it will back.

Cyrus has received the support of two unions representing Virgin staff: the Flight Attendants Association of Australia and the Australian Licensed Aircraft Engineers Association.

The view of the key TWU could well be critical when administrator Vaughan Strawbridge puts a proposed deal to creditors at a meeting on August 21.

Any proposal by the administrator has to be supported with a majority of creditors by number and a majority by value.

With some 9000 employees with entitlements owed by Virgin, the unions could have the potential to block a proposal it dislikes at the August 21 meeting.

Mr Kaine indicated on Tuesday that the TWU might not follow the other two unions in giving public support to any bidder, but would instead be working with the one to be chosen next week by Strawbridge as the “preferred” bidder.

“We look forward to working with the winning bidder to secure the future for workers in a newly launched Virgin,” he said.

“But to make this happen the federal government will have to break its deafening silence and intervene in this process.”

The TWU is continuing to warn that the Virgin sale process still has the potential to be derailed unless the federal government is prepared to offer more financial backing for the airline, which went into administration on April 21 with debts of almost $7bn.

“If efforts to get Virgin back on track fail it will be because of the federal government’s refusal to act,” Mr Kaine said.