Bain Emerging A Favorite As Virgin Australia Decision Stalls

**Update: 06/02/20 @ 06:20 UTC – Bain Capital and Cyrus Capital have been confirmed as the final bidders.

The list of potential new owners of Virgin Australia is being trimmed today. Several suitors remain keen on resurrecting the collapsed airline. As last-minute talks delay an announcement, one clear favorite is emerging – Bain Capital appears to be in the box seat to grab a place on the final shortlist of potential buyers.

The list of potential Virgin Australia buyers has been reduced to X. Photo: Getty Images

The expected announcement today by the airline’s administrators, Deloitte, is another step on the path to resuscitating Virgin Australia. The airline collapsed in a mire of debt and falling travel demand in April. But rather than let Virgin Australia float off into the aviation never-never, Deloitte is making a concerted push to get the airline up and running again.

Bain Capital is looking good

This afternoon in Sydney, Bain Capital is emerging as a short-priced favorite among multiple media outlets. The Boston-based private equity group has been assiduously promoting its proposal in the run-up to today’s announcement. This isn’t Bain’s first foray into the aviation industry, owning Trans Maldivian Airways. They’ve previously flagged taking Virgin Australia closer to its low-cost Virgin Blue roots. The firm also has a record of slashing workforces, making Virgin’s 10,000 plus employees and their unions nervous.

Onboard the Bain bandwagon is Jayne Hrdlicka. The highly regarded airline executive formerly ran Jetstar before leaving the industry. Should Bain Capital ultimately win out, Ms Hrdlicka is a favorite to take over as CEO of a resurrected Virgin Australia. That would see incumbent boss, Paul Scurrah out and the rare sight of a female airline CEO in the hot seat.

Bain Capital ultimately owning Virgin has employees and unions nervous. Photo: Virgin Australia

Bain has reportedly had some 59 or 60 people working on its Virgin Australia bid. Amid concerns it was looking for a fast profit, Bain’s Sydney CEO, Mike Murphy, has been busy stressing they are here for the long haul. He sees a new Virgin Australia positioning itself mid-market.

“We are going through each of those routes and markets to understand what makes sense. I understand the low-cost market strategy has been successful in many markets, and Indigo has been successful on that front, but we are formulating our strategy on exactly where Virgin should be positioned,” Mike Murphy told The Australian Financial Review.

That leaves a second place to be filled on the pared-back shortlist of bidders. There are four other bidders in the running.

Melbourne powerhouse BGH Capital fails to make the cut

Long considered a firm favorite was Melbourne-based private equity firm, BGH Capital. They joined forces with a local superannuation fund, Australian Super, and Singapore’s Temasek. BGH Capital consistently presented as a formidable contender.

Last week, when promoting their bid, BGH Capital raised eyebrows by saying they might need to relaunch with as few as 15 aircraft, building up to more over time. Again, that raised concerns from unions and anxious employees.

The Australian is reporting that BGH Capital has failed to make the final shortlist today.

BGH Capital has flagged relaunching Virgin Australia with a much smaller fleet. Photo: Getty Images

Canada’s Brookfield throws a spanner in works.

Perhaps the biggest surprise of the last week has been the re-emergence of Brookfield Asset Management as a bidder. They’d shown interest in Virgin Australia previously by walked away in mid-May, raising concerns about Virgin Australia’s immediate cash position and the management of the bidding process.

But by last week, they were back in Sydney, giving presentations to various stakeholders and making peace with Deloitte. Brookfield’s re-emergence is believed to be holding up the decision today.

Unions preferred Brookfield’s bid, saying the firm had a history of developing and sticking with investments rather than flipping them for a quick cash profit. But there’s also been concern that other bidders may not be thrilled about Brookfield’s re-emergence, with some reports saying it opens Deloitte to legal action by the other bidders.

Brookfield’s presence back in the bidding process may upset other bidders. Photo: Virgin Australia

And possibly out of the running …

Less favored are Cyrus Capital and Indigo Partners. Cyrus was a surprise inclusion on the provisional shortlist of bidders. They’d flagged running Virgin Australia as a full-service airline. Also, potentially falling over is Indigo Partners. The majority shareholder of several low-cost carriers elsewhere, Indigo Partners presented as an interesting possibility. They’ve previously looked at the prospect of acquiring their own local air operator’s certificate should they not go through here. It may not be the last we’ve heard of Indigo Partners in Australia.

Having said that, either of these two could pull a rabbit out of the hat and beat one of the short priced favorites to the final list of bidders. The expertise of the operators who made the final shortlist is undisputed. They are competent, experienced, and sufficiently cashed up to operate in a notoriously expensive industry. There are some alternative visions for Virgin Australia. Whether they are good or bad will depend on perspective. But one thing looks certain – Virgin Australia will keep flying in one form or another.