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Summary
- Virgin Australia's A$3.5 billion sale to Bain Capital completed, all Virgin's shares transferred.
- Virgin Australia will be onboarding new CEO, Jayne Hrdlicka, while Paul Scurrah stepped down from the role.
- With the completion of the sale, Virgin Australia has emerged from seven months in administration after the pandemic pushed the carrier into bankruptcy.
- Many transformations are expected as Bain Capital takes the reign of Australia's second-largest airline.
Virgin Australia Holdings Limited (ASX:VAH) has finally got a new owner after the completion of A$3.5 billion sale to Bain Capital, the US private equity group. All Virgin's shares have been transferred to Bain Capital and the company is delisted from ASX on 17 November 2020.
The year has been extremely challenging for the aviation industry all over the world due to the ongoing pandemic. However, Australia's second-biggest airline - Virgin Australia collapsed in April 2020. When the country was battling the first wave of COVID-19 crisis, the airline went into voluntary administration. The airline had already been going through losses for the past seven years and was in debt.
Virgin Australia will be onboarding new CEO, Jayne Hrdlicka while Paul Scurrah has stepped down from the role.
Selling the cash-strapped airline was indeed challenging.
During the most unbelievably challenging time for the sector, selling an airline for such a huge loss wasn't something easy. When Deloitte's lead administrator took charge to restructure Virgin Australia, the first challenge they encountered was how to sell an airline which was losing millions monthly.
The cash flow for the airline succumbed to the crushing blow of the pandemic travel restrictions and border closures which led to over A$6.8 billion debt for the company. Meanwhile, despite the airline’s repeated pleas to the Government, a rescue package from the Federal Government was ruled out.
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Deloitte administrators ran the company, working to pay off the debts and facilitate sales. It was indeed a challenging journey owing to the massive insolvency and the tough COVID-19 situation. However, the deal was completed by Deloitte with the transfer of all Virgin's shares to the Boston-based private equity group Bain Capital.
Deloitte has been successful in finalising around A$3.5 billion sale of the Virgin Australia Group. The total commitments include employees' entitlements and customer travel credits along with a settlement of debt with the creditors.
What Lies Ahead for Virgin Australia?
The shutdown of international as well as state border has presented a challenging situation for the airline industry. Vaughan Strawbridge is confident concerning the future of Virgin even though the travel situation remains uncertain in the COVID-19 environment.
The airline group underwent a massive transformation under the administration of Deloitte that vigorously implemented cost-cutting measures to ensure the survival of the airline and reduce the losses.
Some steps taken by Deloitte include a substantial reduction in the workforce, significantly reducing international flight operations while also decreasing its domestic fleet. It also negotiated rent with the airports and the aircraft leasors, that has helped save cost.
READ MORE: Virgin Australia Secures a New Owner While Qantas Shares Survival Plan; What Lies Down the Road?
Incoming chief executive officer Jayne Hrdlicka indicated the forward plans the airline to be a "mid-market" carrier retaining Economy, Economy X and Business classes.
The complementary snacks do not remain on the platter, and the fares are expected to be cheaper. While the Tigerair Australia is already closed, Virgin Australia Regional Airlines will be kept after strategic consideration.
