Virgin Australia’s pilots union has urged its members to vote for Bain’s deal to purchase the airline – despite the TWU holding back on making a similar statement.
The Australian Federation of Air Pilots (AFAP) said in a statement ahead of Friday’s crunch creditor meeting that if Bain failed then its members could potentially lose millions in entitlements.
The AFAP’s public move is significant given the TWU – the largest union – last week refused to praise the investor’s big announcement of its proposal to rebuild the airline.
While Bain beat out Cyrus Capital Partners in May to become the administrator’s preferred bidder, the decision won’t be rubber-stamped until a final creditors’ meeting on 4 September.
Union backing is likely to be crucial given the business’ employees together account for 9,020 of the total number of creditors and are owed $451 million.
AFAP executive director Simon Lutton said on Monday, “Based on our assessment of the second creditors report, the AFAP will be voting in favour of the completion of the Virgin sale to Bain Capital.
“Even though many of our pilot members have lost their jobs, we need to at least ensure they receive their full entitlements and voting for the Bain DOCA achieves this.”
Lutton then referenced a statement by the administrator that said that, should Bain fail to win the creditors’ backing, the sale will go ahead anyway in a more messy asset sale agreement.
“This approach carries with it the increased risk of liquidation, which would mean millions in lost entitlements for thousands of employees,” said Lutton.
“While it is disappointing that the airline on the other side of administration will be a scaled-back operation, the survival of the airline is critical.
“Following administration, the AFAP will focus on holding Bain and CEO Paul Scurrah to their commitments to grow the airline once the pandemic subsides and reinstating our pilot members who have lost their jobs.”
The AFAP is the largest pilot union in Virgin, representing more than 900 of the 1,500 Virgin Group pilots.
However, the AFAP’s move comes despite the lack of a similar vote of confidence from the far larger TWU.
Australian Aviation understands the union’s relationship with Bain is unravelling because of its refusal to dismiss speculation former Jetstar chief executive Jayne Hrdlicka could be the new chairman. Hrdlicka had a notoriously fraught relationship with unions in her role at the Qantas Group.
Last week, TWU national secretary Michael Kaine only said he would “meet workers and discuss the next steps” but added pointedly that the new business would only be successful “if the skills, experience and dedication of its workers are recognised as a valuable asset, not an expense”.
The deal creditors are voting on would see unsecured creditors, including bondholders, receive between just nine and 13 cents in the dollar on their investment, but all employee entitlements paid in full.
Deloitte’s Vaughan Strawbridge, who has overseen the administration process, said the deal represents an “excellent outcome” for Virgin Australia.
“This will provide certainty for the business under new and committed owners. It provides certainty for employees and customers. It provides a return to creditors. And it can be completed sooner, and at less cost to creditors,” he said.