Virgin Australia bidders Bain and Cyrus sweeten pot for employees

The US firms vying to become Virgin Australia’s new owner are pulling out all stops for employees as decision day looms.

Virgin Australia is at the centre of a three-way battle, with bondholders joining US firms Bain and Cyrus in the race to become the airline’s new owner. Picture: AFP

The one upmanship between the two companies vying to become Virgin Australia’s new owner has continued, with rival bidders Bain and Cyrus sweetening their promises to employees.

While any future owner of Virgin is expected to have to shed some staff when they take over, Cyrus and Bain are now in a bidding war for the support of Virgin workers who will have a say in voting for a plan to be put to creditors at their next meeting on August 21.

The news came as Virgin Australia’s bond holders proposed to recapitalise the embattled airline, with a plan to back Virgin management with an upfront capital injection of $800 million to get the carrier flying again.

The bond holders include the Singapore-based Broad Peak Investment Advisers hedge fund, which is backed by Temasek, the controlling shareholder in Singapore Airlines.

But with the sale process still in train, Bain on Wednesday morning publicly confirmed the commitments it made to the administrator on Monday to offer equity to Virgin staff, implement a support program for all employees impacted by the COVID-19 crisis and honour all travel credits provided to Virgin customers.

Rival Cyrus followed on Wednesday with a similar offer to provide workers a chance for career break, flexible work and employees shares if it wins the Virgin bid.

The Bain pledge, made by the company’s Australian managing director Mike Murphy came as the ACTU called for the firm to be transparent with employees and make its commitments public.

Just over 9000 people remain employed by Virgin Australia, including pilots, flight attendants, engineers, ground crews and administrative staff. Most of those workers are currently stood down and receiving the Jobkeeper allowance.

ACTU president Michele O’Neil said rival bidder Cyrus had provided a written guarantee to unions that 100 per cent of entitlements would be protected, along with as many jobs as possible.

n a letter to ACTU president Michele O’Neil, from New York based Cyrus adviser Jonathan Peachey, who is handling the deal for Cyrus, the fund is also offering Virgin staff who remain with the airline the chance to get employee shares as an incentive.

Mr Peachey said Cyrus would provide Virgin staff with the chance to take a career break rather than take redundancy while retaining their Virgin staff rights if they chose to do so.

The letter says Cyrus does not rule out compulsory redundancies at the airline but sees this as a last resort if needed to make the airline financially viable.

The offer of career breaks is aimed at giving staff the chance to take unpaid time off to reduce potential compulsory redundancies.

In his letter to Ms O’Neil, Mr Peachey said that Cyrus would offer Virgin’s unions future benefits including flexible work and the chance to retrain for skills needed to perform other jobs with the airline.

Other benefits include a “share based long term incentive plan so that employees can share in Virgin Australia’s future success,” Mr Peachey said in the letter.

“Cyrus is happy to confirm what we have said previously, that we will honour employee’s existing entitlements, 100 cents in the dollar, and will do all possible, within the context of Cyrus’ stated intentions regarding the ongoing size and configuration of the airline, to retain as many of the highly skilled and loyal employees as possible,” Mr Peachey said.

“Future benefits will accrue to the employees who are able to be retained through the bargaining process that is underway between Virgin Australia Management and the unions to enable the ramp up of the airline, in the difficult period ahead.”

He said Cyrus would “adhere to the commitments made to the ACTU and unions throughout the bid process, including the statement of principles that Cyrus provided to the ACTU and unions at an early stage of the discussions.”

Mr Peachey said Cyrus was committing that there would be a “proper, transparent process in respect of those employees unable to be retained, with compulsory redundancy a last resort.”

“It is now up to the other bidder Bain to do likewise and show Australian workers their bonafides when it comes to protecting the jobs and entitlements of people working in Australia,” Ms O’Neil said.

“The commitment to keep the headquarters where it is, means protecting the jobs that are already in place. Australian unions support protecting as many as possible of the current jobs and working together to create more jobs as the airline industry recovers.”

In response, Mr Murphy provided a four-point list of Bain’s commitment to employees, including to cover all entitlements; to protect as many jobs as possible; to develop a broadbased employee equity participation program and to implement a support program for employees impacted by COVID.

With Virgin Australia administrator Deloitte due to choose between Bain and Cyrus by June 30, the companies have issued a host of pledges and commitments.

These include honouring any prepaid tickets for travel with Virgin Australia and all points held by the Velocity loyalty program’s 10 million members.

Both companies have also entered into an agreement with the Queensland Government’s investment arm QIC, to retain the airline’s Brisbane headquarters in return for a $200m injection.

Neither Bain nor Cyrus would comment on an announcement by bondholders that they had lodged a recapitalisation plan with Virgin Australia’s administrators Deloitte, a move that could negate the need for a sale.

It’s understood the firms believe it is a matter for Deloitte although there is concern the proposal could push out the sale process beyond June 30, adding extra pressure to Virgin Australia’s dwindling cash reserves.

The airline went into administration on April 21 owing $6.8bn to more than 15,000 creditors. Despite its financial predicament, Virgin Australia has continued to operate a network of mostly government-subsidised flights. There are plans to increase services in coming weeks to 320 flights a week by early July.