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Branson linked to two Virgin Australia bids

written by Adam Thorn | May 18, 2020
Virgin Australia Boeing 737-8FE departs from Brisbane
Virgin Australia Boeing 737-8FE departs from Brisbane, at Sunset (Michael Marston)

Sir Richard Branson has been linked to two of the four shortlisted bids for Virgin Australia, according to separate newspaper rumours.

Administrator Deloitte is reported to have whittled down indicative offers to those from private equity firm BGH Capital, US aviation company Indigo Partners, New York investors Cyrus Capital Partners and Boston investment company Bain Capital.

The Australian reports that Bain will link up with Sir Richard’s Virgin Group if it makes it to the final two; while The AFR suggests it could in fact be Cyrus Capital Partners, given it was one of the original backers of Virgin America.

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Deloitte has so far refused to reveal the shortlist, but said in a statement the candidates were “well funded and possessing deep aviation experience”.

Friday was deadline day for indicative bids, though the final deadline for interest is not until 12 June.

The state of Queensland is not expected to show its hand until later on.

However, the potential re-emergence of Sir Richard and his Virgin brand was the big talking point of revelations to emerge on Monday afternoon.

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Cyrus Capital is based in the US but has a presence in Europe. It led a consortium that owned the ill-fated Flybe, Europe’s biggest regional carrier that became the first major casualty of the coronavirus crisis.

The AFR said the Virgin Group was already in that consortium, and plans were that a new airline would be branded ‘Virgin Connect’. In 2005, Cyrus became an investor in Virgin America, which was eventually sold to Alaska Airlines in 2016 for $2.6 billion.

However, surprisingly, The Australian speculated that Virgin could instead be quietly working with Bain Capital, given that they have a joint venture in the cruise industry with Virgin Voyages.

It has also emerged previous frontrunners InterGlobe Enterprises and Brookfield didn’t make the shortlist, with the latter allegedly angry at Deloitte for overseeing an “overly complicated” process.

Lead administrator Vaughan Strawbridge said, “The parties have also worked constructively with the administration process and put forward credible indicative bids. Importantly, each has a plan for the business which can secure the future for thousands of Virgin Australia employees.

“We received more interest than anticipated from parties who are eager to be a part of the future of Virgin Australia.”

On Friday, Deloitte revealed nearly 20 interested parties had been granted access to the data room and eight to a “Virgin 2.0 business plan”.

Earlier, Australian Aviation reported that Velocity Frequent Flyer members will be able to redeem their points on domestic flights from 1 September, after previously freezing the service when Virgin Australia entered administration.

The business, which is separate to the airline, said in a statement it was “hopeful” coronavirus travel restrictions and border closure would be lifted in July, in line with Prime Minister Scott Morrison’s three-step lockdown exit plan unveiled last week.

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31 Comments

  • James

    says:

    Article doesn’t make sense. You list 4 but then say that Indigo partners didn’t get shortlisted?

    • Adam Thorn

      says:

      Ahh sorry, James, that was a typo. I have now corrected. Thanks!

      • James

        says:

        All good Adam! Thanks for that. Just wanted to confirm.

  • Mark

    says:

    Hopefully whoever wins ditches Branson – he has gouged out enough out of VA – and it certainly hasn’t helped them in the past.

    • AN Mark

      says:

      When it was Virgin Blue it was profitbale and remeber that Branson only put up $40 million back in the early 2000’s. Only since it has tranformed into Virgin Australia has it not made a proffit.

  • Paul

    says:

    Brandon has no money. He was behind the calls for the Australian government to pump in $1.4b. Branson only wants to collect his royslry money for use of the brand. I still say a fresh start is required, which means fresh branding.

    • Linda

      says:

      What about REX? They can stay in Australia hands, help them out with public equity. Make it that they can never be sold and is a not for profit airline.

      • Re Linda

        says:

        REX is particaly owned by foreign investors (Lim Kim Hai a Singapore based investor who was a founding shareholders in REX)

    • RE Paul

      says:

      Virgin Group only owns 10% of Virgin Australia they have no control over the board to get a bailout from the AUS gov.

  • Bernard

    says:

    Other media saying Singapore linked to one of the four bidders and Singapore involved with Ansett and Virgin. I don’t remember Singapore Air being involved with Ansett, thought AirNZ screwed Ansett up on its own. In any case former large owners of Virgin should keep away, except maybe for Sir Richard, give a chance to fix the mess Virgin became otherwise walk away too if it’s more of the same. As some would say you had your time.

    • Craigy

      says:

      Singapore Air wanted to buy TNT’s 50% but Air NZ had the option to purchase first as a condition of buying News Corps 50%.

    • David Williamson

      says:

      Singapore airlines had a shares in ansett like 20-30% then wantedTo increase its shares in ansett to like 50-60% but Air NZ blocked the move as they had first point of buying on ansett shares and to screw over Singapore airlines they purchased ansett but then failed to keep it alive Then Singapore bought a large chunck of Air NZ share so really singapore Airlines won but the rest is history

    • Paul

      says:

      Sir Richard should also stay away. Part of the prior problem.

  • Martin

    says:

    It should be quite interesting to see how Virgin manages to float again hopefully this new bidders who ever they will be are able to revitalize a good airline again ,I have flown on Virgin before on its local routes and its staff are always kind.

  • TD

    says:

    Get Sir Richard and his royalties out of it along with other owners who let the company down and stood by the fire they lit. Rename Virgin and let’s get a new Australian airline going again. Pity we have to use international owners to do this as we don’t want another Virgin 2 to occur.

  • Clive

    says:

    A bit rich with Branson wanting a slice of the pie when he and other share holders of Virgin Australia would not invest more to save the carrier. As a share holder of VA, how and why did he and the other major share holders allow Virgin Australia to run up nearly 7 billion dollars of debts. And where is he getting the money for his contribution of the syndicates that he is alleged to be connected with re this bid for Virgin Australia when he is reported to be selling assets to try to save his Virgin Atlantic? His current financial status and being part of the current shareholder collective’s behaviour resulting in almost 7 billion in debt should raise red flags. Any involvement from the previous shareholders in a new consortium for this new bid should not be permitted.

  • Andrew

    says:

    Private equity is the worst possible solution as their only motivation is to make quick money. They usually charge high costs, strip the business to make short term gains and then sell it at the right time (for them) to make quick profit. What is left behind after that is a skeleton that needs to be rebuilt. Aviation experience which means owned an airline in the past and sold it at a huge profit is not good enough. Current and long term aviation experience is most important to ensure long term viability and competition in the Australian market.

  • Nathaniel

    says:

    In this Vol Admin process, it should be mandatory for previous bidders’ bad Mgt of Companies, ie those that have gone bust, to be known.
    If this would be allowed, there would be surprises.

    Just goes to show that RB is so full of his own s$#@, & brazen, to the point of recklessness, that he’d think of ‘bidding’ for his currently defunct airline.

    It’s a ‘long runway’ between now, & the end result. And that, I don’t believe will be good.

  • johngyz

    says:

    I still think rebrand the airline and start afresh. If it is operating in Australia it should have a greater Australian ownership.

  • Neil

    says:

    I have serious concerns about the way the Administrators are handling the sell off of Virgin Australia.
    Interglobe Enterprises and Brookfield were cut off the Shortlist with Brookfield angry with Deloitte for overseeing a complicated process.That tells me that Deloitte would not have a bar of hearing the home truth that if this consortium was giving them the hint that the Airline needed trimming back to make the sale more attractive.
    Also i find it bizzar that Sir Richard,(founder of Virgin),who claims to not have much in reserve,& Cyprus Capital of US & in Europe,who sold Virgin Atlantic to Alaska Airlines and large Regional but ill fated Airline flybee which was an early casualty of CODIV-19.That is not a good track record!!

  • Rod Pickin

    says:

    I really think that the Administrators need to now explain to us the journey that they intend to take with our VOZ problem because there are conflicting reports and opinions out there which do not compute and which would cause much anxiety particularly within the ranks of all the staff. Today it is reported that the company has requested of the Oz Govt. funding to cover its existence going forward. To me that is the next stage on from Administration; – Insolvency? – maybe a different action plan then required by the administrators, maybe liquidation? Whatever the case, the markets and in particular industry observers should be appraised of the action plan at once. Frankly it is very hard to see how any company with outstanding debts of over $6b can be “re-structured” and or rebooted into trading without serious consequences. Seriously, who is going to put in the circa $6b to clean the slate and then open the purse strings again to support trading. Much as I would hate to see it, liquidation is the only pathway available. Deloitte, please explain, Thank you.

  • Bernard

    says:

    Federal Govt won’t nationalise, they’re following capitalist ideology of letting best available buyer waiting as determined by the administrator to get it. Agree this can all go pear shaped with wrong buyer. At least Sir Richard’s ego might get him to do the right thing as he started the whole thing and I like to think if he thought it through, cash producing assets might help his hobby-Vurgin Galatic, to make the airline profitable/viable with new partners. Otherwise it seems like a scenario of selling what’s got value and then bankrupting the rest of it?

  • Steven

    says:

    Branson should be barred from ANY future airline purchase.

    He’s broke, except for his ‘personal’ fortune, which he refuses to dip into to help with any of his currently losing businesses’.
    How many others’ has he possibly lost along the way?
    The Administrator has already lost bidder Brookfield, because they don’t want anything to do with RB. That speaks volumes.
    He just doesn’t like the idea of losing millions’ of $$$$$$, in payment annually, just for the name, which requires him to do nothing. I think it’s called ‘money for jam’………..

  • I know of no country with such a small population of 25 million as Australia that currently has more than one FULL SERVICE carrier. We do not have the critical mass to sustain more than one full service airline as 100 years of Australian Commercial Aviation history has proven. TAA was absorbed by QANTAS, the other carriers failed.

    • Mimi

      says:

      Ansett and TAA operated for many years along side each other both full service airlines and with a much smaller population.

      • Mark

        says:

        And with heavy regulation.

  • Brandon

    says:

    Clive, more correctly, TAA became Australian Airlines, which was sold to QANTAS in 1992.

  • PJ

    says:

    The administrators would be better calling this Virgin 3.0, where Virgin Blue was 1.0 and Virgin Australia 2.0. Virgin Blue was successful and Virgin Australia was a failure.

  • Andrew

    says:

    Yes, although we have dispersed population centres with 1000 km of nothing between them (theoretically, a juicy market), the travelling public are be segmented into more than LCC Economy and Business. Qantas group did a good job of marketing an LCC into V-blue’s original market segment, and VA did a terrible job of trying to reciprocate. I think only a fool would attempt to tempt those corporate snouts out of their employer-funded troughs, (piggy wants more for less, generally) and doing this is what sucked the life and equity out of VAH. Then there was a series of blunders, Crossing the Pacific with a couple of 777’s, the E-jets, VARA and Tiger, taking them (V-blue) from one original (successful /appropriate) aircraft types into multiple tiny markets with expensive machines. Although these were diversified product offerings, they (all) failed to achieve economies of scale to the extent that they covered their FOH fixed overheads.

    VAH used the ‘reforms’ and acquisitions and strategic adjustments as excuse to go to the sharemarket to raise capital a number of times which diluted the original value, and the debt continue to rise along with the next crazy-but-convincing scheme. the problem was that there was a lack of education at the top of one airline and a wealth of it at the top of the other. Both were equally convincing but only one knew what the real numbers were.

    Never mind the uniforms (or the creapy, bikini-fuelled macho bullshit either), mate, control your costs…

    VAH (and I HAVE read ALL the Annual Reports) had no chance with the strategies they employed, and the only hope any successor will have is the re-name (suggestion “Virtue Airlines”- only 3 letters to paint out to lose that money suck), and work closely within the ACCC protections and the various States’ incentives, targeting the gaps in QF /JQ offerings and, most importantly, being happy to play second fiddle.

    Better than no gig at all, eh?

  • john

    says:

    MIMI, google Australian 2 airline policy, and that explains why AN and TN survived together. When that policy was removed, AN’s demise commenced.

  • AGM

    says:

    Whoever buys VA lets hope that they have a vision for the airline. At present they have a great CEO who can do great things with this airline, He was already putting in place policies that would make this airline profitable. You don’t need to compete with Qantas to be a good airline, but you can do things better to set you apart from them. I work for VA and believe in this company I might not get my job but we need 2 good airlines. And it was great to read the different comments on this issue.

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