Virgin boss Jayne Hrdlicka and top execs issued share bonus days before COVID death comments
Virgin Australia boss Jayne Hrdlicka’s plea for the Morrison government to quickly open Australia’s borders — despite the fact that “some people may die” from coronavirus — has come just days after Hrdlicka and her executive team were issued shares in the resurrected airline with a face value of $42.4m.
Company documents seen by Margin Call reveal that Virgin Australia’s new owner, international private equity giant Bain Capital, last week issued Hrdlicka and her executive team 42.4 million shares fully paid to $1 each as part of an incentive scheme to drive the airline’s financial performance.
The scheme could see Hrdlicka and her team reap tens of millions of dollars if their rebuild of Virgin Australia is successful.
Last September Bain agreed to pay $3.5bn to buy Virgin out of voluntary administration, with Hrdlicka appointed chief executive and a director of the airline on November 17. While spokespeople for Bain and Virgin Airlines declined to comment, Margin Call understands the fresh equity in the rescued group was awarded to a group of about 30 Virgin executives and management, including the chief executive, last Thursday.
On Monday Melbourne-based Hrdlicka — who commutes to Brisbane to run Australia’s No 2 airline — told a Queensland University of Technology business lunch that Australia’s borders should reopen sooner than the middle of next year, even though “some people may die”.
“It will make us sick but won’t put us into hospital … some people may die, but it will be way smaller than with the flu,” the American-born boss said at the tail end of a question-and-answer session.
On Monday night Virgin issued a statement seeking to clarify Hrdlicka’s comments, but did not resile from them, saying the airline believed Australia “must learn to live with COVID-19 in the community”.
“We have and will continue to work closely with both state and federal governments to support the health and safety of the Australian community,” a company spokesman said.
Prime Minister Scott Morrison on Tuesday branded Hrdlicka’s comments as “insensitive”.
The swag of new shares for the Bain executive team, which were issued six months after Hrdlicka’s start date, are believed to be subject to a range of performance hurdles tied to increasing the value of the business.
Depending on whether management’s unknown performance hurdles are met, the shares could be worth more or less than their $42.4m face value at their $1-a-share issue price.
The shares come in addition to the base pay and short-term incentives that Hrdlicka and her team have negotiated for themselves with the airline’s new private equity owners.
Bain Capital in Australia is led by Michael Murphy, who is also on the board of Virgin Australia alongside Bain’s Boston-based co-chair Stephen Pagliuca.
The US millionaire is also co-owner of American professional basketball team the Boston Celtics.
Bain, which boasts that it has about $US130bn in assets under management, bought Virgin as its operations were being ravaged by the coronavirus pandemic.
The airline collapsed in April 2020, with its operations propped up by federal government support as COVID crippled Australia’s domestic and international travel industry.
According to documents seen by Margin Call, the new executive shares are being held by custodian company Perpetual Corporate Trust.
The multi-million-dollar issue of new A-class stock is in addition to the 731.8 million ordinary shares that are held by Bain’s BC Hart Investments.
That limited partnership corporate vehicle is based out of Delaware in the US, where tax laws are very favourable to business.
Tennis timing
Opening borders sooner rather than later wouldn’t just help Jayne Hrdlicka and her management team at Virgin Australia drive their and their private equity owners’ bottom lines.
Restoring Australia as a travel destination to the world would also be a boon for Tennis Australia, which with Hrdlicka as chair presents the Australian Open in Melbourne — one of only four grand slam tournaments around the world each year.
The AO is usually held in January, which is well before Scott Morrison and Josh Frydenberg’s Treasury anticipate borders will be opened up to international travellers, which would have a significant impact on Hrdlicka’s plans. It was only on Monday, the same day that the chair was spruiking her bold moves, that the tournament’s chief Craig Tiley told a conference in Melbourne the organisation was “going to make it work”, ruling out rumours the competition could move offshore to Doha or Dubai.
This year, thanks to COVID-19, the competition almost didn’t happen. Play was delayed until February, with TA incurring massive costs to implement strict quarantine measures. TA was paid $4.5m in JobKeeper financial support from the federal government in the 2019-20 financial year, with payments under the scheme continuing until the end of March.
Hrdlicka’s board has also already warned that TA this year is likely to seek external credit and eat into its $80m cash reserves to cover continued high costs.
Opening borders earlier than expected would change all that.
Gosh, it’s Josh
Forget the Coalition’s approval rating, it is Treasurer Josh Frydenberg’s popularity that’s going through the roof, with attendees at Tuesday’s latest budget debrief called to form an orderly queue for their own happy snap with the man himself.
Yes, just like a shopping centre Santa, Frydenberg smiled sweetly for the Australian Chamber of Commerce and Industry cameras as the line of lobbyists and special interest groups whispered their own policy wish lists in his ear.
And they weren’t the only ones getting up close and personal, such was the crowd of 400 business types that packed into Doltone House overlooking Sydney’s Hyde Park.
A list of no less than 30 “honourable mentions” started with the likes of long-serving Member for Bennelong John Alexander (who coincidentally entered politics in the same year as the Treasurer), before moving on to ACCC boss Rod Sims and progressing all the way through to the likes of Vince Sorrenti of Fat Pizza fame.
In amongst it all Helen Coonan got a shout-out as a former member of parliament and current chair of financial complaints watchdog AFCA (due to expire at the end of the month).
Unsurprisingly, no mention of Coonan’s more time-consuming role as executive chairman at Crown Resorts, which no doubt would have kept her busy post-breakfast given the dual royal commissions currently on foot.
Elsewhere in the parade of honorifics, Marcus Blackmore got a mention, as did former speaker of the house Bronwyn Bishop, and former Nationals MP John Sharp, now better known for his outspoken views at emerging airline Regional Express.
But of course, the man of the hour Frydenberg had plenty to say when it came to spruiking his super-spending budget, pointing out his pro-business budget policies while defending the spending as still within the Liberal value set — and reiterating that his seat of Kooyong is the one formerly held by Robert Menzies.
He, along with his starstruck guests, are no doubt hoping proximity alone will get them what they wish for.
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