Bain Capital, a U.S. private investment firm, was announced on Friday as the winning bidder for insolvent Virgin Australia after the rival bidder withdrew its offer.
The bankrupt Brisbane-based company’s administrators agreed on Friday to sell the ailing airline to the Boston-based private equity firm.
Earlier, Private equity firm Cyrus Capital Partners withdrew its offer, due to lack of engagement from Deloitte, an accounting firm responsible for the administration, which was set to name a preferred bidder on Tuesday.
Virgin Australia entered voluntary administration in April due to the coronavirus and after it failed to secure a government bailout, leaving some 16,000 jobs up in the air.
The group’s airlines flew to 41 destinations, including major cities and regional communities, and contributed around 11 billion dollars (or 7.6 billion U.S. dollars) to the Australian economy every year.
However, Deloitte’s administration team the sale and implementation deed was expected to be completed before the end of August, subject to approvals including a vote of creditors.
Vaughan Strawbridge, one of the administrators, said that the sale would secure the future of Australia’s second airline, thousands of employees and their families.
According to Deloitte, the transaction will carry forward all frequent flyer-booked flights, honours all employee entitlements, as well as supporting the current management team.
Meanwhile, the Bain sale plan could still be scuttled by Virgin’s bondholders who were owed 2 billion dollars.
They have presented a last-minute buyout proposal to take control and recapitalise the airline, which will be considered at the August meeting of creditors alongside Bain’s offer.
Virgin Australia, which has about 130 aircraft, has been struggling to pay about 7 billion dollars in debt.
Australian Prime Minister Scott Morrison, said he would glad a successful bidder emerged from the process.
“I look forward to Virgin going forward and more importantly for the jobs in Virgin to be secured.
“It’s a sector that faces very significant difficulties,“he said.
Virgin Australia’s Chief Executive Paul Scurrah, said the airline’s management would now work closely with Bain Capital on its vision for the business to move forward.
“Bain Capital has spent many hours over the past weeks speaking to us and getting a deep understanding of our business and working to secure a deal with our administrators.
“It was always the goal to bring our airline out of administration as quickly as possible in a stronger financial position and this announcement brings us a step closer to that,” Scurrah said.
Virgin Australia had previously operated around 31 per cent of domestic flights, while Qantas controlled around 58 per cent of flights within the country.
Meanwhile, thousands of Virgin Australia staff had already been stood down and its fleets largely grounded due to COVID-19 travel restrictions.
Bain’s Australian Managing Director, Mike Murphy, said Virgin would have up to 6,000 employees from 10,000 earlier and 60 or 70 planes when it resumes flying in September.
Australian flagship carrier Qantas is also struggling, but the airline was doing much better than Virgin Australia financially before the coronavirus crisis.
On Thursday, Qantas announced it would cut 6,000 jobs and continue to stand down 15,000 employees due to the fallout from the pandemic.
Meanwhile, politicians, aviation experts, and industry officials have noted that Qantas will effectively have a monopoly in the Australian skies if Virgin Australia collapses.
Australia has extremely limited and slow rail lines across the vast country, so most people depend on domestic air travel.
