Richard Branson keen for Virgin Australia revamp connection

Richard Branson is still seeking a role in a relaunched Virgin Australia despite Virgin Atlantic’s struggle to survive.

Sir Richard Branson has a close relationship with Bain Capital with his Virgin Group partnering with the US private equity firm on their cruise line venture “Virgin Voyages”. Picture: Toby Zerna

Sir Richard Branson’s Virgin Group will continue to push for a stake in a rejuvenated Virgin Australia despite the financial woes of its Virgin Atlantic airline.

As Virgin Australia CEO Paul Scurrah outlined plans for the airline’s relaunch on Wednesday following its sale to Bain Capital, Branson’s Virgin Atlantic filed for protection in a US bankruptcy court.

The move was undertaken to shield the airline’s assets in the US, as it sought to put into effect a $2bn rescue package to help Virgin Atlantic see through the COVID crisis.

A Virgin Atlantic spokesman sought to clarify the court action as one that supported the solvent recapitalisation of the carrier rather than a chapter 11 bankruptcy filing.

“In order to progress the private-only solvent recapitalisation, the restructuring plan is going through a court-sanctioned process to secure approval from all relevant creditors before implementation,” he said.

“With support already secured from the majority of stakeholders, it’s expected the restructuring plan and recapitalisation will come into effect in September.”

He said they were confident in the plan for Virgin Atlantic which was cutting 3500 jobs, and unsuccessfully sought the equivalent of a $900m loan from the British government.

The recapitalisation plan announced in July, includes over $1bn from shareholders, $365m from Branson’s Virgin Group and $310m from US hedge fund Davidson Kempner Capital Management.

Branson was also believed to be prepared to tip in $100m to Virgin Australia in return for a 10 per cent stake in the company and a board seat.

The Virgin Group had a similar shareholding in the airline before it went into voluntary administration on April 21 with debts of $6.8bn, and was represented on the board by Warwick Negus.

On Thursday, a Virgin Group spokesman confirmed discussions were continuing with Bain Capital around their investment in Virgin Australia.

The US private equity firm and Mr Scurrah have previously stated their commitment to retaining the Virgin brand for the airline, despite the $15m a year cost of the licensing arrangement.

A day after announcing changes at Virgin Australia including the removal of at least 3000 jobs and a major reduction in fleet size, Mr Scurrah took to the airwaves to push for borders to reopen.

He told the ABC, the airline’s relaunch and retention of up to 6000 jobs was “reliant on borders being open and travel being something people wanted to do”.

“No-one can survive with the demand as it is, and borders being closed,” Mr Scurrah said.

“The consequence of this virus has been an economic disaster and at this point in time, far more than a health disaster. It is important we keep the health part of this under control but we really need to think about how we bring the economy back as well.”

His concerns were underlined by a new report by Citi Research analyst Jacob Cakarnis, who warned that increasing travel restrictions between the states and rising case numbers in Victoria would delay the domestic market recovery.

As a result, travel within Australia was not expected to fully resume until late this year, and international travel was unlikely until mid-2021, Mr Cakarnis said.

“Looking at airports, we believe pressure is mounting from a cash flow covenant perspective,” he said.

“While the number of flights has increased, anecdotal evidence suggest that load factors have declined.”