Unions back Cyrus in Virgin buyout battle

Two key unions have named their preferred new owner of Virgin Australia in an effort to pressure administrators Deloitte.

Two key unions have declared a preference for Cyrus over Bain as the new owners of Virgin Australia. Picture: Bloomberg

Two key unions have declared their support for Cyrus over Bain as the new owners of Virgin Australia, saying the company is the best fit for the airline.

Days before final bids are due to be lodged with administrator Deloitte, the Australian Licensed Aircraft Engineers Association and Flight Attendants Association of Australia publicly backed Cyrus.

ALAEA secretary Steve Purvinas said the Cyrus team “seemed to have a far deeper appreciation for the Virgin brand”.

“I feel it would be better for all of our members if Cyrus was successful come the next cut by the administrator,” Mr Purvinas said. “I think Virgin will be best placed to succeed with Cyrus once they put in place their plans.”

FAAA secretary Teri O’Toole said she thought it was important to make their preference known so the right decision was made by Deloitte at the end of the month.

“They’ve just got really good brand values,” Ms O’Toole said.

“They’re the right fit. They’ve got experience with the Virgin brand and when Cyrus talk about the airline, and their plan for it, it’s with genuine commitment.”

She said Cyrus was very familiar with brand co-founder Sir Richard Branson’s approach to the airline of “employees first, customers second and shareholders third”.

“Cyrus are putting their reputation on the line for this — they’re not dipping their toes in it,” said Ms O’Toole. “They’re committed. You can tell that when they speak about the airline.”

Other unions, including the Transport Workers Union and the Australian Federation of Air Pilots are continuing to weigh up the proposals made by the two bidders.

After multiple meetings and briefings with both Bain and Cyrus, TWU secretary Michael Kaine said they were finely balanced.

“We’ve got Bain who seem to have a deep capital capacity … in case there’s a second or third (COVID) shock that comes,” Mr Kaine said.

“Cyrus is busy credentialling itself as having operational expertise and that’s obviously critically important as well from our perspective.”

He said they would hold off on a decision until they saw what the final bids looked like, after they were presented to Deloitte next Monday.

Deloitte is then expected to make a choice by June 30, just over two months after being appointed administrators to the airline, which owes $6.8bn to creditors and has stood down much of its 9000-member workforce.

Cyrus is understood to have made a concerted effort to bring unions on board, with a plan to maximise employee numbers and retain the existing management led by Paul Scurrah.

Bain, on the other hand, proposed a smaller, leaner airline with a tight domestic network that would be built up over time to incorporate more routes, including international.

The private equity firm was being advised by former Jetstar CEO Jayne Hrdlicka and KordaMentha partner Mark Mentha, both of whom were asked not to attend a Zoom meeting with the ACTU on Tuesday at the request of Mr Kaine. The Australian understands Mr Kaine told Bain’s Sydney-based boss Mike Murphy that he only wanted the principals and not the advisers present in a bid to “eyeball” Virgin’s potential new owner.

Ms Hrdlicka and Mr Mentha attended previous meetings with the ACTU and the AFAP.

A source close to Bain stressed that the private equity group remained committed to relaunching Virgin as a “hybrid carrier” and that it would make a significant upfront capital investment in the airline to ensure it could not only survive but thrive in the long term.

Earlier bidders in the process, Brookfield and BGH Capital, pledged to invest more than $500m and over $800m respectively upfront. Bain’s Initial investment could even be higher.

“Bain wants to accelerate management’s plan for the airline and invest much more heavily upfront, notably in transforming the airline’s outdated IT systems,” the source said.

Meanwhile a meeting of retail bondholders on Tuesday raised concerns about speculation that the Bain bid could leave them with 10c in the dollar.

“They need to know they are not even in the ballpark of an acceptable return.

“They’re actually in the wrong postcode.

“… Everybody has to remember when it comes to the vote, it’s the bondholders who will need to be satisfied about the acceptability of the price,’’ one bond holder told the meeting.