Plans to change Virgin, and airline boss Paul Scurrah

Virgin Australia CEO Paul Scurrah is set to leave the airline as new owners Bain prepare to take the carrier down-market.

Virgin Australia CEO Paul Scurrah will leave the airline after falling out with Bain over plans to take the carrier down-market. Picture: Glenn Hunt

Virgin Australia chief executive Paul Scurrah has had a dramatic falling-out with the company’s new owners over plans to relaunch­ the airline as a low-cost carrier.

Bain Capital, which purchased Virgin after it collapsed in April with debts of $6.8bn, is expected to install former Qantas executive Jayne Hrdlicka to run the company.

Key unions, however, are refusing­ to negotiate with Bain over new workplace agreements, describing the replacement of Mr Scurrah as a “serious and worrying development”.

The Transport Workers Union has a long history of clashing with Ms Hrdlicka, but has a better relationship with Mr Scurrah, who is close to senior figures in Queensland Labor.

The downmarket shift for Virgin comes despite Bain’s earlier assurances that it would not ditch its network of domestic lounges aimed at business travellers, or overseas operations.

Mr Scurrah had made it clear he wanted Virgin to continue as a full-service carrier.

Despite backing this plan ahead of the September 4 creditors’ meeting which approved the sale of the airline to Bain, the private­ equity firm is now understood to have reconsidered its relaunc­h strategy.

The shift became apparent earlier this week after “complimentary snacks” and wine supplies­ for business travellers ran out when expired catering contracts were not renewed.

Mr Scurrah, in comments earlier on Wednesday, refused to comment on whether he would be replaced by Ms Hrdlicka, who ran Qantas’s low-cost carrier Jetstar and worked on Bain’s bid for Virgin. “There’s been ongoing speculation for some and I’ve never been in the habit of commenting on speculation,” Mr Scurrah said.

Virgin declined to answer questions on Wednesday, while Bain did not respond to requests for comment.

Michael Kaine, the TWU’s national secretary, said “the ink is not yet dry on the sale of Virgin and it appears that Bain Capital is behaving as we feared”.

“We are suspending negotiations on enterprise agreements while we seek clarification on these developments.

“For our part, we are engaged in talks in good faith.

“If the plan and scope of the airline as outlined in August by Bain Capital has already been scrapped, then this is a serious betrayal that must be addressed.”

The TWU and other unions had been working with the airline to finalise new workplace agreements­ by the end of the month.

Flight Attendants Association of Australia secretary Teri O’Toole said unions had not been advised of any changes to management. “We would obviously be very disappointed, as would most of the Virgin employees, if Paul Scurrah was not at the helm because­ he’s certainly been a respected­ leader since being appointed,” she said.

Virgin flagged relaunch plans in early August, intending to simplify its fleet to a single aircraft type, Boeing 737s.

Mr Scurrah said 3000 of the company’s 9000 staff would be made redundant, but Bain Capital had agreed to restart international flights when possible and keep open the airline’s network of business lounges. Virgin also closed its budget Tigerair brand.

The TWU’s Mr Kaine has previously flagged opposition to Ms Hrdlicka, who was expected to sit on the new Virgin board, because of a difficult relationship between the union and Qantas relating to a 2011 shutdown and pay freezes.

Virgin’s sale to Bain is due to be finalised at the end of the month, when all shares in the company will be formally transferred to the firm.

The Queensland government has committed $200m to the company, conditional on the airline remaining headquartered in Brisbane.

Discussions with British billionaire Richard Branson’s ­Virgin Group over a possible investme­nt and a new trademark licensing agreement are con­tinuing.