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Queensland government bids for Virgin

written by Adam Thorn | May 13, 2020
Virgin Blue 2
A Virgin Blue Boeing 737-700 departs from Brisbane in 2006. Speculation had raised the prospect that Virgin Australia could return to its roots. (Craig Murray)

The Queensland government has announced it’s set to bid for Virgin Australia.

Queensland’s new Treasurer Cameron Dick has already appointed an investment company and said the financial package could take the form of a “direct equity stake, a loan, guarantee or other financial incentives”.

“This is a competitive space, but Queensland is a serious contender and our discussions with the administrators have been making progress,” Dick said.

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“We have been very clear. Two sustainable national airlines are critical to Australia’s economy.

“We have an opportunity to retain not only head office and crew staff in Queensland, but also to grow jobs in the repairs, maintenance and overhaul sector and support both direct and indirect jobs in our tourism sector.

“We saw the punishing increase to the cost of flights after the Ansett collapse, and this government will not stand by and let that happen again.”

The state government has appointed Queensland Investment Corporation’s Damien Frawley to oversee the bid ahead of management’s Friday deadline for offers.

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“Virgin administrator Deloitte has set an ambitious time frame and we look forward to delivering on this mandate for the Queensland government,” said Frawley.

The dramatic development comes after reports earlier suggested Virgin Australia’s management team want to continue flying to international destinations such as LA, Tokyo, New Zealand, Bali and Fiji.

The Sydney Morning Herald claims to have spoken to bidders with access to a confidential handover document which also forecasts that remaining a full-service airline could triple annual earnings to $1.2 billion in the 2022 financial year.

The apparent revelation is one of multiple rumours to emerge this week, ahead of administrator Deloitte’s Friday deadline for bids to be received.

All parties who had access to the management plan document signed strict confidentiality clauses, but one told the newspaper that the reborn airline is loathed to give up some profitable international routes because it would mean forfeiting hard-to-secure gate slots.

Shortly before the pandemic, for instance, Virgin planned to start flying a new Brisbane to Tokyo Haneda airport route.

Virgin Australia originally launched as budget carrier Virgin Blue, but slowly morphed into a more complete international rival to Qantas, enduring huge losses.

It’s led many to speculate that the new airline would return to its roots, but these new rumours suggest current management instead prefers a more balanced approach.

Recently released minutes from the first creditors meeting also appear to confirm less change than initially thought, with one line suggesting, “The best outcome for everyone is the preservation of the whole business.”

Yesterday, Australian Aviation reported rumours that the billionaire founder of Indian budget carrier IndiGo is set to join the list of interested parties.

Rahul Bhatia will make the approach through his InterGlobe company, The Australian claimed, and has already hired advisory firm Investec.

Bhatia and his father, Kapil, have an estimated fortune of more than $5 billion, and InterGlobe, of which he owns 51 per cent, has already invested in the local Australian tourism industry.

Other rumours state that the Macquarie, Brookfield joint bid has been scrapped and that Sir Richard Branson could invest in the reborn airline through selling a stake in his Galactic space project.

As of Wednesday, potential suitors linked include BGB Capital, Wesfarmers and Andrew Forrest, along with rumoured interest from state governments.

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28 Comments

  • gary

    says:

    think only way forward for virgin is to be domestic only & 737 only.

    They can’t start leasing more aircraft, even if cheap to lease.

  • Tinai

    says:

    Good on you Virgin. I don’t care who services Fiji. I have a connect to every carrier in Australia and Fiji thar runs so so deep.

    We need everyone back on deck. VA QF Fj JQ. Every carrier a great one full of loyal employees and customers.

    There’s room for everyone.

  • yort

    says:

    Isn’t that nice of you to keep us informed.

  • Mark

    says:

    If bidders sign a strict confidential clause re information you would expect that to be honoured not have “leaks” as the paper has indicated. At the end of the day this is crystal ball stuff.

  • Craigy

    says:

    Surely it is the new owners decision as to the direction the airline takes post administration not Scurrah and his team. I am also skeptical of the supposed earnings by 2022.

    • PT

      says:

      so it’s Scurrah’s fault for trying to fix it in the few months he’s been there. It was all plain sailing before then? He got the fleet? He set the cost structure?

  • Dale M

    says:

    Richard Branson is scraping together everything he owns just to keep Virgin Atlantic from the same fete….. I hardly think he’d be on the lookout for more airline investments at this point in time. Let alone one that has already lost him hundreds of millions already.

  • Mike

    says:

    Please cancel the 737 Max orders at Virgin.

    • Bill O'Really?

      says:

      Yep, Airbus is always better, go A320 Neo please

  • I would have thought that it would have been better for them to shrink back to VA’s roots via Virgin Blue i.e. a domestic operation, at least for the time being.

  • gary

    says:

    qld govt now bidding for virgin. Now VA is really stuffed.

  • Rod Pickin

    says:

    With due respect, the Qld Govt. has difficulty managing its own financial affairs so I fail to see how they will manage a proper commercial enterprise subject to more scrutiny than they currently enjoy. Sure the operating body may well be Q.I.C. fine but $200.00m, seriously, where is the balance coming from. Sure, offer from the heart, not the brain.

  • AJ

    says:

    To Gary and Rod. You might want to do some research on QIC. They are very competent and own large stakes in both Brisbane Airport and Melbourne Ports. They have a very successful track record in investing and bringing together other investors from Australia and overseas.

    • Rod Pickin

      says:

      Yes, QIC/QIDC is a successful organisation, been around for a while, steady as she goes, QAGO, the go to financial arm of the Qld. Govt. – could also be called a Private Equity Group. At this time, as I see it, if the QIC thought there was mileage in an investment bid for VOZ they would have actioned their interest well before now. Since it is apparent that they did not show that interest it worries me that now maybe the Qld. Govt. is overstepping the mark and getting them, QIC, to do the bidding that they, QIC, didn’t see merit in at the start then who knows where that style of action would finish.
      Whilst I am a hopeful VOZ survival suporter, I think the apparent unity ticket of Qld. Govt. and QIC is not the right prescription.

  • Paul

    says:

    A lot of speculation. The new owners of the airline, whatever it is called, will determine the routes that will be flown. That should be part of the proposal.
    As for the Qld govt bid? Well they do not understand the industry or what it takes to run an airline. Besides they have no money.

  • John Gyz

    says:

    Paying Richard Branson a franchise fee for using the Virgin brand is a waste of money. He had no interest in bailing it out. The airline should be rebranded with an Australian brand.

    • Paul

      says:

      ??? totally agree. The brand is now tainted in Australia and not worth the £10m paid to the UK organisation. New owners new brand

      • Mannie

        says:

        The Qld State Labor Govt is billions’ of $ in debt, & now they want to partake of a collapsed airline???
        Get real! Newly minted Treasurer, Cameron Dick, would not know the first thing about an airline, except sitting at the ‘pointy end’.
        He & his Premier want to put the parlous
        State into more debt……typical Labor; all they know is how to SPEND taxpayers’ money!

    • Linda Weaving

      says:

      I agree. If the QLD government buys it, it should be re-branded. Virgin has been Australian, whatever they may try to claim. Taxpayers may be burdened with debt for a long time, though, if they do.

      • Hein Vandenbergh

        says:

        QUICKA Airlines – QUeensland Investment Corporation Knows About Airlines… ?? Certainly NOT that silly, anachronistic and expensive Virgin name, it always WAS stoopid…nor was Branson ever interested in supporting it, though always keen to get his passive non-productive franchise fee each year. The name is meaningless in Oz.

  • Adrian P

    says:

    So the Queensland government is planning to invest in a competitor to Queensland And Northern Territory Air Services.
    Would there be a conflict of interest if these two airlines bid for a Queensland Government subsidised route?
    Might be better to invest in regional airports and let QANTAS, Rex and Virgin Blue 2 battle it out.
    Airlines come and go but they all need the airports, as do regional Australia.

  • Colin Campbell

    says:

    So a bankrupt State government is going to invest in an airline with a $6.5 billion debt and make a success of it with no knowledge of the aviation business? Give us a break!!

    • Charlie

      says:

      Spot on!
      It’s so ludicrous, it’s laughable!
      Typical Labor brainlessness.

  • Linda Weaving

    says:

    The ‘current management’ drove the airline to bankruptcy, why should anyone listen to THEM?

    • Rod Pickin

      says:

      Hi Linda, with respect, the current VOZ management inherited the main problem but they weren’t afforded the time to turn the problem around, they certainly didn’t cause the problem, Cheers RodP

  • Peter

    says:

    The People’s Republic of Queensland want to get involved in aviation now? Lotsa luck with that! The best way to make a small fortune in aviation is to start with a large one!

  • John

    says:

    Qld just want a seat at the table . Their goal will to ensure Virgin Australia’s Head Quarters remain in QLD . Once at the table they will partner up to one of the other bidders .

  • neil Campbell

    says:

    I cannot believe the administrator wants to put Virgin up for sale under it’s current arrangement.
    What the Airline needs is a decent consortium to come in and cut back on the size of the fleet, that is basically become a Boeing 737-800 fleet, but cut by half,as well as ATR72 Turboprops and unfortunately cut backs to the workforce.
    The airline should stop flying overseas,(when able to),and sell off their widebody fleet of Boeing 777-300s & Airbus A330-200s.I believe this is the only way it can survive under these condition when we are able to fly again. It is important because Australian needs a strong competition against the flying Kangaroo, otherwise we will pay through the nose for our airfares!

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