Several weeks ago Virgin Australia entered voluntary administration. This came after the carrier’s request for government aid was denied, leaving the airline without any other options.
Virgin Australia’s owners have been unwilling to provide the airline with further funding. The company has a complicated ownership structure, with Etihad Airways, HNA Group, and Singapore Airlines, all owning roughly 20% stakes.
Virgin Australia has been looking for new investors, and we now have a sense of how that process is looking.
In this post:
Virgin Australia selects preferred bidders
Virgin Australia had received five non-binding proposals as of this past Friday, and today the administrators selected two preferred bidders, who could be investing as much as four billion AUD in the airline.
At this point Bain Capital and Cyrus Capital Partners are the two parties still in the running for taking over Virgin Australia. As it’s explained, both companies are well-funded, have deep aviation experience, and see the real value of the business and its future.
Now these two preferred bidders will have the opportunity to submit their final binding offers, after in-depth bidder engagement with stakeholders. The plan is for these offers to be submitted by June 12, and then a final decision should be made by the end of June.
Virgin Australia may have new investors shortly
How would Virgin Australia change?
Right now the two potential investors are working on their visions for the future of Virgin Australia. Let’s look at a few potential considerations, as noted by Executive Traveller.
In the case of Bain Capital:
- Bain Capital has invested in Trans Maldivian Airways, and also entered a joint venture with Titan Aviation Holdings in late 2019, to develop a diversified aircraft leasing portfolio
- Bain Capital would likely want Virgin Australia to be somewhat more of a low cost carrier, making it similar to the old Virgin Blue
- Virgin Australia would relaunch as a domestic-only airline, though over time could launch international flights again
In the case of Cyrus Capital Partners:
- Cyrus was a major investor in Virgin America back in the day, so has some experience investing in “Virgin” airlines
- Cyrus would likely want Virgin Australia to stay more full service and premium, similar to what it is now
- Virgin Australia would relaunch as a domestic-only airline, though over time could launch international flights again
- Cyrus is generally supportive of Virgin Australia ordering new A350s or 787s to replace 777s
Cyrus supports a long-term Virgin Australia fleet refresh
Bottom line
By the end of the month Virgin Australia should hopefully have a new investor, if everything goes as planned. I’ve long been a fan of Virgin Australia, but the company’s complicated ownership structure with so many conflicting interests has really hindered the airline.
I’m hopeful that a simplified ownership structure at Virgin Australia will allow the airline to eventually reach its full potential.
VA's LAX flights in partnership with DL were reportedly the 'only' profitable international flights prior to COVID-19.
Considering VA owns 4 of the 5 77Ws, it may be cheaper for Cyrus to mothball them until USA/Australia opens their borders for TransPac travel. Even then it'll be a while before TransPac travel builds up to pre-COVID levels.
@Azamaraal
I believe Cyrus wants to continue profitable long haul routes. They would follow Delta with replacing less efficient 777's with long range A350s and B787s, which would take into account both fuel and fewer passengers for the foreseeable future.
I am a bit confused with the last paragraph regarding Cyrus' wanting to replace 777 with 787/A350.
Australia is big but only 5 hours C-C. If they are giving up international travel they why go with long range thin route aircraft?
Or are they actually planning to retain some international? You certainly don't need a 777 to fly Perth-Sydney.
I am surprised to see that Bain was selected as they were contrary to what Deloitte and crew wanted to see for the airline. It will be interesting to hear why they were selected. Australia needs another full service airline, monopolies are never good for the customer.
I've got to say, it makes absolutely no sense to me that VA would abandon its LAX business--the international operation to LAX is profitable in its own right, and provides feed that frankly won't be swayed over to DL. Cutting New Zealand and Pacific services--maybe that would do something to their bottom line, but Bali?
Wonder what will happen to its new Haneda slot? Will it be given up?
Bain Capital is also involved in Virgin Voyages...but are probably regretting that investment now
Who ever lost the bid will have a second opportunity 5 years from now.
VA is a failing operation being bullied by Qantas powers.