Draft flightplan for phoenix-like Virgin to land at ASX again

Bain Capital is considering publicly listing Virgin Australia just one year after it purchased the country’s second-largest airline out of pandemic-driven collapse.

Virgin is targeting a 33 per cent share of the domestic market. Picture: David Clark

Bain Capital is considering publicly listing Virgin Australia just one year after it purchased the country’s second-largest airline out of pandemic-driven collapse.

The American private equity group, which purchased Virgin in a $3.5bn deal, is expected to retain a significant holding if there is an eventual listing on the ASX.

Two sources with knowledge of the discussions but not authorised to speak publicly said Bain had approached at least one investment bank as it eyed a possible float in mid-2022.

However, a spokesman for the private equity group said it was the investment banks that had “approached Bain Capital with proposals to relist Virgin Australia on the ASX in 2022”.

“Bain Capital will consider the proposals in good faith and has not made any decisions,” he said.

An ASX listing in 2022 would be notably faster than the market had expected, with the Mike Murphy-led private equity group completing the Virgin acquisition only in November last year.

Mr Murphy, shortly after Bain sealed the purchase — having outcompeted bidders including Oaktree Capital Management, BGH Capital and Cyrus Capital — said he hoped the airline would return to profitability by February this year.

Bain Australia CEO Mike Murphy. Picture: John Feder

Financial accounts lodged with the corporate regulator in November show Virgin recorded an underlying loss of $76.8m as domestic and international revenues fell sharply because of tight health restrictions and limits on flights.

To June 30 this year, passenger revenues fell 70 per cent.

The end of administration also wiped $4.4bn in claims owed to creditors from the company’s balance sheet.

A source close to the airline, speaking on condition of anonymity, said an ASX listing would allow Bain to recoup some of its investment in Virgin while befitting from the rapid return of travel as state borders reopened and international travel began.

While it is unclear which investment banks have approached Bain with the recent proposals, the private equity group had been advised by Goldman Sachs at the time of the Virgin sale process.

Deloitte had engaged Morgan Stanley, while Virgin’s long-time advisers had been UBS.

Bain has significantly restructured Virgin, including replacing the airline’s well-regarded chief executive Paul Scurrah with former Qantas and Jetstar executive Jayne Hrdlicka. The company has also rapidly expanded its fleet of Boeing 737s, and will have 77 of the aircraft by February.

In October, Ms Hrdlicka said the aircraft were “an important part of our planning and will -ensure we’re ready to ramp up flying and meet pent-up demand for domestic travel as soon as the opportunity presents itself”.

Virgin Australia CEO Jayne Hrdlicka at Sydney Domestic Airport. Picture: Britta Campion

Virgin is targeting a 33 per cent share of the domestic market by increasing the frequency of flights and reach of its network. Qantas and Jetstar have more than 70 per cent of the market, while smaller rival Regional Express is expanding its capital city network to include Melbourne-Brisbane flights.

Bain faced significant resistance from Virgin bond holders at the time of the sale, which followed a seven-month process run by Deloitte, with two hedge funds, Broad Peak Investment Advisors and Tor Investment Management, failing to stop the transaction being finalised.

The company’s bond holders had made a claim on $1.99bn but eventually accepted a deal to recoup $800m after the Federal Court shot down their attempt at forcing Deloitte to put a new bid to Virgin shareholders.

Virgin and Qantas have scrambled to add flights as the Queensland and Western Australian borders begin to reopen.