Ever since Virgin Australia went into administration on April 21, owing about $7 billion in debt, the speculated list of contenders has been growing.

It includes billionaires such as colourful Virgin Group chief executive Richard Branson (who to date has refused to put his own cash in to save the airline), Australian mining magnate Andrew Forrest and Indian aviation tycoon Rahul Bhatia through his company InterGlobe Enterprises.

InterGlobe Enterprises on Friday confirmed that it had signed an agreement to participate in the sale process, but would not reveal more due to confidentiality agreements.

A host of others are also reportedly interested in making a bid, including private equity firm BGH Capital (which is backed by superannuation fund Australian Super), retail conglomerate Wesfarmers, US airline investor Indigo Partners and Singapore’s sovereign wealth fund, Temasek.

After initial suggestions governments in NSW and Victoria could step in, Queensland’s Government on late Wednesday rocked up with a last-minute bid.

But the firm list of who is willing to put their money where their mouth is has not yet been made public.

The deadline for lodging the first “non-binding indicative offers” to take over the airline was Friday night.

The airline-appointed administrator, Vaughan Strawbridge of Deloitte, expects to take final binding offers by June.

Mr Strawbridge has previously indicated that 20 “interested parties” were scoping out the sale but this week said he was expecting less than half (about eight) would be in the race by close of business on Friday.

He told The Australian he expected Virgin’s shareholders – including Singapore Airlines, Etihad Airways, Richard Branson’s Virgin Group and Chinese conglomerates HNA and Nanshan Group – could be wiped out.

They sit behind the 9,000 Virgin staff owed about $450 million.

And Mr Strawbridge has also warned that Virgin’s unsecured bondholders – owed about $2 billion – should prepare to take a haircut.

Deloitte has also vowed that customers who booked flights before Virgin entered administration will be given a “conditional travel credit” of the same value.

Virgin has so far received about 340,000 requests for refunds after cancelling 65,000 flights between March 1 and April 30 due to the pandemic.

Queensland Government’s last-ditch bid a surprise

Currently it is really anyone’s guess who will emerge victorious as the new Virgin owner, but aviation experts have been caught by surprise by the Queensland Government’s last-ditch rescue bid.

Virgin Australia was not successful in getting a $1.4 billion loan from the Federal Government but, late on Wednesday, Queensland Treasurer Cameron Dick revealed that the state-owned Queensland Investment Corporation (QIC) could make an official bid for a stake in the airline.

Mr Dick said the state has offered to put $200 million (and possibly more) on the table in a bid dubbed “Project Maroon”, on the condition the airline would keep regional routes in Queensland and the new company’s headquarters would be in Brisbane, where Virgin’s head office currently is.

Home Affairs Minister Peter Dutton dismissed Queensland’s bid as “laughable”, while Deputy PM Michael McCormack said Queensland’s government should stick to running its economy and leave Virgin to the private market to sort out.

Mr Dick shot back with with a tweet “Look mate, just stick to cruise ships…” in reference to the Ruby Princess debacle.

It is unclear what form the state investment will take. It could be a direct equity stake, a loan, guarantee or other financial incentives.

It appears that if QIC gives Queensland’s Government a green light to buy a stake in the airline, it would be bidding as part of a consortium involving other financiers and investors.

But, setting the politics aside for the moment, there are obvious questions about the potential risk to taxpayers given the uncertainties surrounding COVID-19’s impact on aviation.

The International Air Transport Association (IATA) has warned that ongoing restrictions due to coronavirus mean that global air traffic will not return to its previous levels for up to three years.

It said air traffic will be about 50 per cent less at the end of the year compared with 2019, and warned more airlines could go bankrupt from the coronavirus pandemic.

The situation is so dire that Berkshire Hathaway chairman Warren Buffett decided the investment firm needed to sell its entire stakes in the four largest US airlines in April.

Mr Buffett said his firm would not fund businesses that were “going to chew up money in the future”.

New owner has to be willing to take an initial loss

Aviation analyst and veteran Neil Hansford told ABC News that whoever is chosen to run the airline has to have significant aviation experience and has to be willing to take an initial loss.

That rules out state governments, he said.

“Queensland Investment Corporation has no aviation experience,” Mr Hansford said.

They are arriving a day-and-a-half before the wedding, looking for a bride.

“If they were trying to get into partnerships, they should have been joining partnerships two to three weeks ago.”

He said $200 million is of “no consequence” and “isn’t going to buy any influence” given debts owed by Virgin Australia are about $7 billion.

He also noted that whoever takes over Virgin will have to cut unprofitable routes, including some that fly into regional areas of Queensland.

“If the Queensland Government wants to guarantee their regional services, they need to come to a deal with people like Alliance,” he said.

“Alliance is a 50-aircraft operation based in Brisbane. They were providing a number of the services to Virgin, to places like Bundaberg.”

He also pointed out it was unlikely the Federal Government — which, all the way along has argued it will not bail-out a single airline and the private market needs to sort this out – would step in as a major bidder.

The only chance of federal intervention, he said, was for it to give guarantees on the leasing of new aircraft (meaning if the company goes bust, it’s on the hook for lease payments).

“But they’d also have to do that for Qantas because the Federal Government has said all the way through, they are into industry-wide solutions,” Mr Hansford said.

Centre for Aviation executive chairman Peter Harbison said if Queensland’s Government does make a final bid, it won’t do so on its own.

“They’d have to have someone with deep pockets,” he said.

The airline business is a very risky business, with very low returns.

“To be putting several billions upfront at risk, and to be running the risk of losing that much each year, is a big call.”

Mr Harbison also noted that there was now an additional hurdle for the administrators, with existing regional airline REX possibly becoming a more formidable player.

The company had initially been touted as a potential bidder for Virgin Australia. But now it could move on its own.

REX’s board has begun talks with potential equity partners to establish a domestic network, in addition to its existing regional services.

It is expected to make a decision on whether or not to proceed within the next eight weeks.

“The administrator [Deloitte] now has to cope with the potential that’s someone’s going to come in and cherrypick the most lucrative routes: Melbourne, Sydney and Brisbane,” Mr Harbison said.

“It changes the modelling that the potential investors have to make because they’d be relying enormously on being able to fly these routes — that’s nearly half the Australian market.”

Corporate governance questions raised with state bid

Aside from the rocky economics of a state government intervening, there are also corporate governance considerations.

Corporate governance expert Julie Garland McLellan said the Queensland’s Government last-ditch bid was “jaw-dropping”.

“It’s a shocking outcome on a number of levels and it shows a complete lack of understanding on the basic rules of governance,” she said.

If the government wants to influence the location, they should be making Queensland a better place to invest for everybody.

“If they want to specifically support a company, they can do that by means of incentives such as tax breaks, without needing to own equity.”

Ms Garland McLellan said in a scenario where government steps in, ministers would be deeply into board and executive decision making.

They would have to be motivated to work for the company’s best interests, not by personal interests or state interests.

Ms Garland McLellan said the risk was that government directors on the board would ask the board to act in ways that are not necessarily in the company’s interests.

In addition, it did not have the funds to go alone.

“My view is that this particular government does not have a strong balance sheet … and would not be able to keep funding loss-making companies,” she said.

Whoever wins the final bid would do so on strategic grounds.

“It will be a question of, ‘can we get the tourism, can we get the slots at airports,” she said.

Former Austrade economist who is now at UNSW business school Tim Harcourt said “Queensland’s got a long history in aviation” given Qantas is an acronym for its original name, “Queensland and Northern Territory Aerial Services”.

But he agreed that the main problem, if the Queensland Government was successful in the bid for Virgin, was, “they’d have to govern it in the national interest”.

“I can understand them wanting to keep its headquarters in Brisbane, but you have to make a decision for employment across the country,” Mr Harcourt said.

“And the trouble for a state government is making sure not everyone’s placed in Brisbane and Townsville.”

Asking politicians to not be motivated by politics may be a tough ask.

-ABC