Virgin Australia's long road to new ownership and a relaunch is almost over. On Tuesday, a Federal Court in Sydney cleared the way to transfer over 8 billion Virgin Australia shares to new owners, Boston-based Bain Capital. The ruling came despite two shareholders challenging the transfer.

Yesterday's ruling confirms former shareholders are out of pocket. But some shareholders had argued there was some value in some of Virgin Australia's assets, including its frequent flyer scheme. They argued the administrators, Deloitte, had pushed through the sale process and did not get full value from the collapsed airline.

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Bain Capital to take full ownership of Virgin Australia next week

Some of the shareholders asked why the frequent flyer program, Velocity, had been significantly devalued. In 2019, when Virgin Australia took control of 100% of Velocity, the price the airline paid suggested Velocity was valued at nearly US$1.5 billion. Now, Deloitte says Velocity is valued at less than $500 million. The shareholders questioned this new valuation.

In the hearing, as reported in The Australian Financial Review, Deloitte's legal representatives agreed there was some residual value in parts of the airline, but liabilities far outweighed these. As a result, the former shares were valueless, and the shareholders out of luck.

In the hearing, Deloitte relied on a largely unused piece of law in Australia's Corporations Act. Section 444GA allows the transfer of shares if the court finds they have no value. Had the Velocity program retained its $1.5 billion valuation, an argument based on Section 444GA might well have failed yesterday.

But the Judge agreed with Deloitte's lawyers, and the transfer of shares to Bain Capital will take place next week.

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At yesterday's hearing, it was argued there was very little residual value left in Virgin Australia. Photo: Getty Images

Virgin Australia still has a date in the US bankruptcy court

It's not quite the end of legal proceedings for the resurgent airline. Tomorrow, Deloitte is heading to the United States Bankruptcy Court in New York to clear the US Chapter 15 bankruptcy hurdle.

That hearing, on Thursday afternoon (New York time) will deal with various Deeds of Company Arrangement, that Virgin Australia is subject to. In addition, the transfer of the shares needs the tick of approval from the US court.

What's a US bankruptcy court got to do with an Australian airline? It's all about protecting Virgin Australia's US assets and helping them deal with US creditors.

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Virgin Australia is presently running a pretty bare-bones operation. Photo: Virgin Australia

A parsimonious approach to flying

While Virgin Australia has kept flying will in administration and throughout the sale process, it is flying at significantly reduced levels. That's not just a result of the travel downturn this year. It's also a matter of keeping day to day operating costs to a bare minimum. Over the past few months, Virgin Australia has taken a very parsimonious approach to its operations.

There is also considerable disquiet on frequent flyer forums about the future and value of the Velocity frequent flyer program. Many members who didn't bail earlier this year and transfer their points to Singapore Airlines' KrisFlyer accounts while they could are now ruing that decision. Others are now burning their points on what they can.

Frequent flyers have proved a bright spot for most airlines this year and largely resilient to the travel downturn. That makes the write down of the Velocity program somewhat unusual. It was enough to catch the eye of some disgruntled and out of pocket shareholders.

With Bain set to take full control of Virgin Australia this month, all eyes are on what they will do next. There have been some big promises and already some disappointments. What they do with Velocity will also be worth keeping an eye on.