Virgin pilot union backs Bain despite TWU silence

written by Adam Thorn | August 31, 2020
A Virgin Australia 737-8FE departs at sunset from YMML (Victor Pody)

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.

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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.”

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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.

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8 Comments

  • Rod Pickin

    says:

    One has to wonder, WTF; – on one hand we have a company that has invested untold amounts of monies into the formation and running of a business, it has to comply with reams of Govt., industry and social rules and regs and at the other end of the exercise it hopes to return a profit to its shareholders/backers in order to continue onwards and upwards into the future. On the other hand we have a Union who does not have any direct financial interest in the enterprise, it raises it’s own income from very high membership fees from staffers from within the enterprise concerned and in the cold light of a winters day their only motivation is to ensure that the enterprise has to expend as much time money and conditions as they can possibly achieve for the membership. Now it is evident that the Unions want to dictate who etc will be appointed to the board of management of the enterprise even though they have no financial interest within the company setup process let alone the education, skills and expertise required to contribute to such a position. On top of this, I see now there will be an official investigation into the alleged distribution of monies from Industry/Union superannuation funds, those monies going as as “donations” to unions $40m and “advertising” $400m. when surely those funds should have been distributed within the funds for members. I think WTF is well justified.

  • Yusef

    says:

    1,500 Virgin Group pilots? Well under 1,000 with Tiger, NZ, A330, ATR72 and 777 gone.

  • Paul

    says:

    The unions have zero right to say who or who not should be on the board. They should be happy their members have a job and pay their dues. They need to remember that on Friday no deal equals no airline equals job losses. But hey let’s just worry about who will sit on the new board 9f directors.

  • Teddy

    says:

    TWU running scared? Wow! That’s a first!
    Roll on Friday, when things will get very interesting in this debacle.
    As well as a ‘review’ of union funds’, there should be an Inquiry WHY those responsible, allowed VA to fail miserably.

  • Adrian P

    says:

    I wonder how keen the AFAP (a union) would be if the pilots found themselves employed through a labour hire company like so many people are. The Covid 19 problem high lighted the importance of quality cleaners and other auxiliary staff to a successful outcome but are some of the worst treated employees regarding pay and conditions.
    Will the unsecured creditors be willing to supply goods and services to the airline without payment upfront after being paid 13 cents on the dollar?
    From the Wiki website regarding Toys R Us. On March 17, 2005, .a consortium of Bain Capital Partners LLC, Kohlberg Kravis Roberts (KKR) and Vornado Realty Trust announced a $6.6 billion leveraged buyout of the company.
    On September 18, 2017, Toys “R” Us, Inc. filed for Chapter 11 bankruptcy, stating the move would give it flexibility to deal with $5 billion in long-term debt. Although the “retail apocalypse” was a factor, some analysts cited that the rapid increase in debt occurred under its private equity ownership.

  • Rod Pickin

    says:

    Hi Teddy; – I think we all know who was the cause of the failure; people like that are extremely hard to manage especially when they are so acutely focused on their end result, they are unable to even consider that even a minute course change could be of benefit to all, they consider themselves to be infallible, but they do eventually but at what cost? There was one winner out of this mess and I think scrutiny of them is warranted, at least an explanation. Records show that a major shareholder, Air New Zealand cleary was at odds with the direction that the VOZ board had set, clearly they were not being listened to resulting in them eventually offloading their shareholding in VAH to foreign interests and commercial penalties were applied to VOZ ops with ANZ. Under the circumstances, especially as it concerns our mates across the ditch I think we should be fully appraised of the circumstances leading up to ANZ’s decision to offload their shareholding in VOZ and specific actions taken by ANZ in the advertising of and sale actions undertaken. Blind Freddy could see that a sale of such a block of shares to a non Oz entity was going to do serious damage to the enterprise. In addition, maybe purely by coincidence, but shortly after the share sale the executive involved resigned his position with ANZ to take up a seat in N.Z Politics. I think it would good to have further advices.

  • Adrian P

    says:

    Hi Rod,
    Are you proposing that all domestic airlines should have 51% Australian ownership as per QANTAS.
    Also
    Bain Capital was founded in 1984 by Bain & Company partners Mitt Romney, T. Coleman Andrews III, and Eric Kriss.
    Willard Mitt Romney (born March 12, 1947) is an American politician, businessman and former presidential candidate who has served as the junior United States senator from Utah since January 2019. He previously served as the 70th Governor of Massachusetts from 2003 to 2007 and was the Republican Party’s nominee for President of the United States in the 2012 election.

  • Teddy

    says:

    To Rod Pickin above……

    I’m well aware of the multiple reasons’ VA went broke. As well as NZ’s ‘finger in the pie’ scenario.
    I was just highlighting the fact that these businesses’ which fail, & their bosses’, should be held to account.
    Unfortunately, that was NEVER done for AN.
    But that’s a story for another day………

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