The company behind the successful bid for Virgin Australia, Bain Capital, has vowed to keep thousands of jobs, honour all employee entitlements and carry forward all travel credits and Velocity frequent flyer booked flights.
The Boston-based global investment firm on Friday also gave an “ongoing commitment to invest in regional services”.
Virgin Australia’s administrator, Deloitte, on Friday entered into a sale agreement with the firm after its private equity rival Cyrus Capital Partners withdrew its offer.
Sources close to the deal told ABC News that stakeholders such as workers and unions were initially sceptical of Bain’s offer and worried that it would not protect worker entitlements in full.
But once the firm put it in writing, the gap with its bidding rival, Cyrus Capital Partners, closed.
Will Virgin creditors back Bain Capital?
Bain Capital is one of the world’s leading private investment firms, with about $US105 billion in assets under management.
Founded in 1984 with 19 offices and 240 investment managers worldwide, the firm comes with years of experience in aviation deals, having played key roles in several airline restructurings, including Atlas Air.
The firm also has ties to Virgin Group founder Richard Branson, via a cruise ship joint venture with the group called Virgin Voyages.
It has been an active investor in Australia for a few decades and manages money for the Future Fund.
Final approval for the Virgin Australia sale needs agreement from the majority of creditors, who will meet in August.
There are about 12,000 creditors owed almost $7 billion.
The biggest include secured lenders who are owed about $2.3 billion, about 50 aircraft lessors owed about $1.9 billion, and more than 9000 employees owed $451 million.
Unsecured bondholders, who stand to lose a large part of their $2 billion investment in Virgin as a result of its collapse, are preparing a last-ditch buyout proposal, which will also need to be considered by creditors.
What happens to travel credits and where will the new airline fly?
Managing director Mike Murphy said Bain Capital would carry forward all existing travel credits, both direct purchased and through travel agents.
He said it also would invest to see the Virgin Australia and the Velocity program more closely integrated.
Currently the frequent flyer program is run under a separate entity, but remains a lucrative business for the airline.
The revamped airline will likely operate a much smaller fleet, flying mainly domestic routes and short-range international flights to countries such as New Zealand.
During the bidding process both Bain and Cyrus indicated they would not attempt to operate the carrier as a full-service airline like Qantas, nor would they slim it down entirely so it became a low-budget airline like Jetstar.
Instead, Virgin Australia would re-emerge as a mid-market value service.
That could mean that Virgin’s invitation-only The Club, which was created by former CEO John Borghetti as a rival to Qantas’ Chairman’s Lounge, gets chopped.
And despite Bain’s commitment to regional services, it is still possible unprofitable routes could be axed.
“We are determined to see that Australians have access to competitive, viable aviation services for the long term,” Mr Murphy said.
“Under our ownership we will strengthen Virgin’s regional services and ensure the airline emerges offering exceptional experiences at great value while continuing to service business travellers, as well as those of us travelling for fun or to visit loved ones.”
How will 10,000 jobs be protected?
Mr Murphy did not give a specific number of jobs the firm would protect but said it would “support and celebrate Virgin Australia’s unique culture”.
Staff who remain with the airline would be offered the chance to be part of an “employee ownership/profit-sharing scheme”.
Transport Workers’ Union national secretary Michael Kaine said the jobs of 10,000 Virgin workers now depended on the federal government extending JobKeeper and supporting the airline with an aviation package.
“We want the fullest footprint possible for Virgin and how full it is will really depend on the federal government stepping up,” he told ABC News.
“The extent of job losses can be minimised, but it is very much in the government’s hands.”
ACTU president Michele O’Neil said while the agreement provides protection of employee entitlements, it would result in job losses.
“What is needed now is for the federal government to play its part to secure a viable future for the aviation industry and its workers,” she said.
Bain came to the bidding table with assistance from former Jetstar CEO Jayne Hrdlicka, who also previously worked at Bain’s consulting arm.
There were suggestions Ms Hrdlicka could take over as CEO, but incumbent Paul Scurrah is the preferred leader and will stay on.
Mr Scurrah said Bain had demonstrated a deep understanding of aviation and Virgin’s culture.
“We are aligned in our vision for Virgin 2.0 and look forward to working with them to secure the airline’s future,” Mr Scurrah said.
The changes at Virgin come amid turmoil for the airline industry as flights remain largely grounded due to the coronavirus pandemic.
On Thursday, Qantas announced it would be cutting 6000 jobs and would not resume substantial international flights until July 2021.