Fears mount before Bain updates business plan for Virgin Australia

Bain is due to make its formal DOCA proposal to the administrator on August 12 which should include details of how much it proposes to give to the bondholders. Picture: AAP

Virgin Australia employees and the Queensland state government face an anxious wait in the coming days to learn more details about Bain Capital’s business plan for the airline.

An update is expected on the management plan for the airline in the days ahead.

It comes with fears mounting that its original strategy could be recut due to a second spike of COVID-19 cases in Victoria, which has shut its borders and also flowed on to some travel restrictions for NSW due to community outbreaks in the state.

Bain or Virgin Australia management are yet to disclose exact details of the business plan under private equity ownership or the amount that will be paid out to the bond holders, owed about $2bn.

But the view of some is that Bain, which has already injected about $125m into the airline after winning a sales process run through Virgin Australia’s voluntary administrator Deloitte, could adjust its original strategy due to the current travel environment.

Two areas that are expected to come under close focus will be the extent to which Bain services regional routes and the position it takes on offering airline lounges to customers.

The Queensland government, advised by Jefferies, will no doubt be taking a keen interest, given that it had earlier offered the Brisbane-based Virgin Australia $200m worth of government assistance.

Bain is due to make its formal DOCA proposal to the administrator on August 12 which should include details of how much it proposes to give to the bondholders.

But the bondholders were not set to learn how much they will get until they are given a formal report by the administrators, schedule to be delivered on August 19, ahead of their meeting on August 26.

The Australian reported in June that Bain’s plan was to relaunch Virgin as a hybrid airline with a low cost base but offering a business class, airport lounges, a more integrated Velocity frequent flyer program and regional, domestic and eventually, international services.

Virgin was also to return to the skies with about 40 Boeing 737 planes in the air, with scope to expand closer to 70 as travel demand returns to normal after the COVID pandemic.

Before the onset of COVID-19, the Virgin 2.0 management plan involved cutting 3000 staff, so it will be interesting to see if more jobs are shed.

Virgin Australia was placed in voluntary administration in April after it made unsuccessful requests to secure a $1.4 billion loan from the Commonwealth to help it through the coronavirus pandemic.

The Australian last month reported that the Virgin 2.0 management plan to resurrect the airline championed by chief executive Paul Scurrah involved what some had described as “nips and tucks” to the carrier, but Bain wanted a big restructure of the airline to help it thrive.