In a win for Queensland, Virgin Australia will remain based in Brisbane. The Queensland state government campaigned heavily for the airline to keep its headquarters in the state. Yesterday, the final bids were submitted in the Virgin Australia sale process. The bidders confirmed Virgin Australia’s headquarters would stay in Brisbane.
Both bidders confirm Virgin Australia HQ to stay in Brisbane
Virgin Australia collapsed in April and has since been administered by global insolvency firm, Deloitte. There were some 20 parties initially interested in the airline. Deloitte whittled them down to two; Bain Capital and Cyrus Capital. The administrator confirmed in a statement on Monday that both parties had submitted final, binding bids to buy Virgin Australia.
It is believed the Queensland Government’s investment arm, the Queensland Investment Corporation (QIC), did a deal with both Bain and Cyrus on the weekend. It is reported that QIC offered US$138 million in benefits to keep the airline based in Brisbane and to take a stake in Virgin Australia.
Both Bain And Cyrus accepted the deal. Bain’s Australian boss, Mike Murphy, had previously said a Brisbane base was a good fit for Virgin Australia. The Queensland Government is reported to be delighted a jewel in Brisbane’s corporate scene is staying put.
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Bidders work hard to get Virgin Australia employees on side
With many of Virgin Australia’s employees based in Brisbane and those employees representing the largest chunk of creditors, both bidders needed to come up with a proposal that kept employees on side.
Deloitte will make a recommendation on who should buy the airline. But ultimately the deal needs to be voted on by creditors. That’s still a couple of months off.
Both Bain and Cyrus have been busy reassuring the employees and their unions. Keeping the airline based in Brisbane goes some way to achieving that.
But both bidders are also looking to streamline Virgin Australia, flying fewer aircraft to fewer places, therefore needing fewer employees. That’s making the unions nervous.
The Flight Attendants Association of Australia and the Australian Licensed Aircraft Engineers Association have backed the Cyrus bid. The Transport Workers Union is playing its cards closer to its chest and is still talking to both bidders.
Bain Capital has said it will honor all entitlements owed to Virgin Australia employees. It would offer equity to employees who stay with the airline and help retrain those who lose their jobs.
In the race for the all-important employee creditor vote, Cyrus is said to have the upper hand – for now.
Other stakeholders reassured as Virgin Australia gets set to downsize
As the final bids went in, both Bain and Cyrus moved to reassure stakeholders that it would be mostly business as usual if they bought the airline. Existing tickets and travel vouchers would be honored. Bain and Cyrus both said the Velocity frequent flyer program would stay, as would current balances and the “pricing architecture.”
“Both Bain and Cyrus have done an enormous amount of work to get here today, are well-funded, and are enthusiastic supporters and see real value in this business going forward,” said Deloitte’s Vaughan Strawbridge in a statement provided to Simple Flying yesterday.
“Both have previously flagged some of their thinking around a future-state carrier publicly, including operating a smaller, single-branded domestic and short-haul international airline that also has growth potential. Ultimately the size of the airline will be dependent on the timing and level of demand by customers as travel restrictions are eased.”
Confirmation by both bidders yesterday that Virgin Australia will remain headquartered in Brisbane is a win for the Queensland Government. It is also good news for those employees based there who end up keeping their jobs. But as Deloitte, the bidders, and the unions are flagging, a relaunched Virgin Australia will mean job cuts, and that’s going to be painful for a lot of good people.