Virgin Australia Financially Secure? [Now in Voluntary Administration]

[deebens]

So it's Bain Capital on one side and an unnamed investment bank partnered with an infrastructure investor on the other?

 

[RAM]

Your reply while perfectly sensible seems to rely on common sense. Whereas the original question came from a legal perspective so.. common sense should have been right out the window

To answer the question while thinking along legal lines, VA (and QAN and Rex and whoever) has the ability to sue for whatever reason they can articulate. However it would up to the court system to allow a suit (it has to have some merit) and an answer would rely on going through an actual court process.

And I'm assuming the government would argue their right under a number of legal precedents that aviation companies have no ability to sue when governments are carrying out their duties..

i.e the government is not moving any goal posts without you previously know said goal post moving was always possible. You're participating in a market the government regulates and effectively are given a licence to do so.

It would be madness to publicly think about any kind of lawsuit on this basis as the government's position is that any airline doesn't get to make the rules on the national interest relating to hundreds, thousands or millions of lives being at stake - and VA certainly won't be the one saying otherwise!

However, the Federal Govt has been on the losing side on several class actions where their actions 'in the National Interest' caused undue financial and other harm to some in the community. The most recent is the Fed Govt's denial (like asbestos & tobacco) about the PFAS chemicals used on the defence bases and at AIRPORTS generally. After years of trying to exhaust the funding of the applicants the Fed Govt folded just as three of the cases were about to produce a very nasty result given many dressing downs by the Federal Justices to the Fed Legal team for their 'obvious attempts to forestall justice' as one quotable exchange went.

Observation point at Sydney Airport (north west of 3rd runway) built with childrens playground is one such PFAS site btw. Coincidentally the playground was quietly dismantled a few years ago for no apparent reason...
(Had to use article from this renowned publication )

$212.5 million PFAS compensation payout settlement ...
www.portstephensexaminer.com.au › News › Local News

Mar 19, 2020 - ... in a class action over PFAS contamination are expected to receive $86 million of a $212.5 million settlement with the federal government.

The joke is though, that Q is the worst impacted by the Federal Govt border lockdown.

 

[Revenge]

Any correlation to toilet paper hording and early transferring miles to KF, I wonder?!

I wonder if you still think there's a correlation. I'm no TP stockpiler but I right about now I am very glad I moved my all my Velocity points to KrisFlyer about a month ago!

 

[melb78]

Lets hope ever who buys VA will invest in it and make the airline a bloody good run at QF. if VA did not become a full service Qf would not been in a hurry to put new business class seats on the 380 and A330. We do need 2 full services Airlines here

 

[jakeseven7]

VCs usually load up whatever they buy with tons of debt. Isn't VAs problem that it has too much debt already?

Disclaimer; I am not a financial whizz.

Depends, mostly they cut costs, beef up the business sales then sell it off X years later - get in get out fast before the cracks start forming

But there have been some good examples of companies turned around by PE..... right?

 

[jakeseven7]

So it's Bain Capital on one side and an unnamed investment bank partnered with an infrastructure investor on the other?

Well Bain's history would show they would expect a razor gang approach to a fatty VA structure....

I wonder if PS would hang around?

Edit: I see Bain have got history with other Virgin businesses too

 

[travel_bug]

So it's Bain Capital on one side and an unnamed investment bank partnered with an infrastructure investor on the other?

Newbie here - it appears so:

Bain in spotlight as Virgin process heats up

The US private equity firm has expressed its interest and is keeping a close eye on the process.

www.afr.com

And if Bain was to acquire VA, I'd be really interested to see what their MO would be considering some of their history.

In the U.S they don't seem to have the best reputation with keeping staff in general, or of keeping the pay/conditions of those that don't get tapped on the shoulder (though this is in brick and mortar retail which has already been struggling in an e-commerce world): https://www.washingtonpost.com/busi...retail-has-decimated-million-jobs-study-says/

Additionally, though they at least seem to have some history with an airline through their acquisition of Trans Maldivian Airways (seaplanes) that seemed to have been going well and growing, it appears that Maldivian employment law has provided them the ability to recently halve the salaries of the workforce due to COVID-19 losses: https://edition.mv/business/16026 and https://edition.mv/news/15324 (Maldives have no minimum wage to my knowledge).

In all, I'm not sure that if they did their research into employee rights in Australia (Fair Work Act's minimum employment standards plus any existing awards) that they would be interested in VA, or if they still were, if they would keep much of an Australian workforce when they could hire an overseas workforce at a cheaper rate with fewer rights.

However, (and just to show that we have no idea what will happen), Bain did partner with the Virgin Group for the new Virgin Cruises so in total naivety perhaps there may be some goodwill or sentimentality - or maybe Branson behind the scenes could use the relationship with Bain to protect the brand.

 

[muppet]

Lets hope ever who buys VA will invest in it and make the airline a bloody good run at QF. if VA did not become a full service Qf would not been in a hurry to put new business class seats on the 380 and A330. We do need 2 full services Airlines here

Wow so true.

Remember Qantas’ seven across A330 business class on the transcon route they charged $2k ew!

 

[Doctore1003]

Wonder who is the “strategic airline investor” that’s partnered with private equity to consider a bid??

 

[jakeseven7]

Wonder who is the “strategic airline investor” that’s partnered with private equity to consider a bid??

Qantas Group?

I wonder if Alliance have it in them? They fly alot for VA now anyway.... but hard - QF would be forced to sell their stake in Alliance to make that work.

 

[tomlee1986]

Qantas Group?

I wonder if Alliance have it in them? They fly alot for VA now anyway.... but hard - QF would be forced to sell their stake in Alliance to make that work.

doubt the government or ACCC would allow that to happen lol

 

[jakeseven7]

Lets hope ever who buys VA will invest in it and make the airline a bloody good run at QF. if VA did not become a full service Qf would not been in a hurry to put new business class seats on the 380 and A330. We do need 2 full services Airlines here

Ugh and I remember DJ's 'business class' which was just a blocked eco seat.

Yea no thanks, would prefer a scaled back VA to a full return to DJ times!

 

[Doctore1003]

Wonder who is the “strategic airline investor” that’s partnered with private equity to consider a bid??

Is someone going to mention SQ or do I have to be the one who triggers everybody??

 

[HS-TQE]

Is someone going to mention SQ or do I have to be the one who triggers everybody??

Well HNA did say "strategic american airline investor" when they 'last attempted' to sell their VA stake and the assumption was DL

 

[Doctore1003]

Found this bit from the AFR article quite interesting:

Without government support for Virgin, there are thought to be two ways that the Virgin situation could play out. One of those is through a pre-agreed deed of company arrangement, which would require agreement from unions and governments, and then cleans out unsecured creditors.

It would need creditor approval, which would likely include employees, frequent flyer point holders and more.

The other would be placing Virgin in voluntary administration, which would remove any certainty around who would end up owning the airline. This option might be less politically attractive.

It is understood that the interest from the private sector prefers Virgin going into voluntary administration, enabling new investors to restructure the debt and take control by removing or shaving down the existing shareholders.

This would enable the new owners to restructure the company into one that makes a profit. This could involve significant job losses.

Option #2 seems a lot cleaner, but the implication is that it would lead to much more dramatic changes for the airline. Option #1 requires negotiation with stakeholders, which would give the new owners less flexibility to make cuts.

Private equity investors circle over Virgin

One consortium involves a private equity investor partnered with a "a strategic airline investor", while the other is believed to be an investment bank partnered with an Australian infrastructure investor.

www.afr.com

 

[Supersonic Swinger]

Well HNA did say "strategic american airline investor" when they 'last attempted' to sell their VA stake and the assumption was DL

That was my thought, although given they are also requesting bailout money from the US government I'd be surprised.

Still, they already own stakes in Aeromexico, Air France-KLM, China Eastern, Korean Air, LATAM and Virgin Atlantic.

Other than Alitalia, Virgin Australia is the only one of their self-described 'Core Global Airline Partners" that they don't own a stake in: Delta Airline Partners : Delta Air Lines

 

[pauly7]

Found this bit from the AFR article quite interesting:

Without government support for Virgin, there are thought to be two ways that the Virgin situation could play out. One of those is through a pre-agreed deed of company arrangement, which would require agreement from unions and governments, and then cleans out unsecured creditors.

It would need creditor approval, which would likely include employees, frequent flyer point holders and more.

The other would be placing Virgin in voluntary administration, which would remove any certainty around who would end up owning the airline. This option might be less politically attractive.

It is understood that the interest from the private sector prefers Virgin going into voluntary administration, enabling new investors to restructure the debt and take control by removing or shaving down the existing shareholders.

This would enable the new owners to restructure the company into one that makes a profit. This could involve significant job losses.

Option #2 seems a lot cleaner, but the implication is that it would lead to much more dramatic changes for the airline. Option #1 requires negotiation with stakeholders, which would give the new owners less flexibility to make cuts.

Private equity investors circle over Virgin

One consortium involves a private equity investor partnered with a "a strategic airline investor", while the other is believed to be an investment bank partnered with an Australian infrastructure investor.

www.afr.com

I think for those directly and substantially affected, the fact that there is interest from external parties is a good first sign. There may well be life for VA yet

 

[Bagpuss]

It would need creditor approval, which would likely include employees, frequent flyer point holders and more.

Frequent flyer point holders (Velocity members with points) are not a secured creditor.
At most you could get a worn out piece of an unserviceable ATR tire. But you would need to go the maintenance hanger and dig it out of the rubbish pile yourself.

 

[clarkkent]

ACTU says government faces $800m bill for Virgin workers

The Australian Council of Trade Unions says the federal government could have to stump up $800 million for Virgin Australia workers if it collapses, which would be better spent saving the airline.

www.smh.com.au

Hadn't seen this angle, govt apparently on the hook for quite a bit if it all falls through.

The ACTU said on Friday that Virgin's almost 10,000 workers would be owed at least $600 million in unpaid wages, leave and other entitlements if it went under, while 6000 indirect employees would be owed around $200 million.

The government's Fair Entitlements Guarantee pays workers' entitlements if their bankrupt employer cannot.

 

[Bagpuss]

ACTU says government faces $800m bill for Virgin workers

The Australian Council of Trade Unions says the federal government could have to stump up $800 million for Virgin Australia workers if it collapses, which would be better spent saving the airline.

www.smh.com.au

Hadn't seen this angle, govt apparently on the hook for quite a bit if it all falls through.

Send the government a subscription to the SMH so they can educate themselves.
Oh it’s actually not paywalled. Probably there’s more to it. Guess not cause there’s a website about this. Fair Entitlements Guarantee (FEG) | Attorney-General's Department