- Creditors, owed $6.8 billion by Virgin Australia, have agreed to a deal which will see Virgin Australia 2.0 take to the skies.
- They approved the deal by US Bain Capital to relaunch Virgin as a budget airline, agreeing to receive cents on the dollar in doing so.
- Had they rejected it, the airline’s assets would have instead been sold.
- Visit Business Insider Australia’s homepage for more stories.
Virgin Australia 2.0 has been in the workshop for months, but Friday’s vote means it will take to the sky in a new form.
On Friday Virgin creditors, who are owed $6.8 billion, approved private investor Bain Capital’s plan to strip back the embattled carrier into a budget airline.
“Today was an important milestone and a significant step in Virgin Australia’s recovery,” Bain managing director Mike Murphy said in a statement issued to Business Insider Australia.
“We can now continue the rebuilding process from the strongest possible platform and with the least disruption. We are working closely with Virgin management to build a stronger, more profitable and competitive Virgin Australia, and we look forward to the future with confidence.”
Having won the approval of administrators back in June with its plan to relaunch the airline, Bain has spent months trying to convince Virgin stakeholders to get on board.
Having slashed 3,000 jobs from the airline and axed Tigerair, the unions now say they’ll be working with Bain to try and protect the jobs that are left.
“We send our support and solidarity to every Virgin worker who is making the hard decision to take voluntary redundancies,” Australian Council of Trade Unions Michele O’Neil said.
“We will be continuing to work with Bain Capital and Virgin management to ensure they keep to their commitments and that Virgin workers who stay with the airline are treated with respect, and have good jobs with fair pay and conditions. The future of the airline must be built on the skills and expertise of Virgin Australia’s staff.”
With the deal now having passed, creditors will receive up to 13 cents on the dollar for their debts. While marking a major loss for them, the proposition remains superior to what they would have likely received if the airline is allowed to collapse: zilch.
Behind the scenes Bain Capital has been working to gain supporters
Bain’s deal was helped along significantly by last-minute endorsements from two very different corners.
The first came from Virgin founder and British billionaire Richard Branson, alongside Virgin Group chief executive Josh Bayliss, who revealed on Thursday he was voting in favour of the agreement.
“I have confidence in the revival plan for Virgin Australia, and Virgin will be working closely with Bain to rebuild the airline,” Branson said in a statement.
“We look forward to helping to create the next important chapter, as Virgin Australia get back to flying and connecting Australia once again.”
Boasting the plan was “the best way forward for the airline and its wonderful employees”, Bayliss echoed the sentiment.
“Australia needs two competitive airlines, and Bain has the resources, aviation experience, and long term vision to bring this plan to life,” he said.
More significantly, however, is the support of the Transport Workers Union (TWU) representing many of the airline’s employees, who are also owed billions.
Despite keeping mum throughout the process, the TWU revealed at the 11th hour it also backed the plan. It joined the Australian Federation of Air Pilots, the Virgin Independent Pilots Association, as well as the Australian Licensed Aircraft Engineers’ Association in supporting Bain’s proposition.
If creditors had voted down the proposal, Virgin would have sold its assets to Bain Capital, liquidating the airline.
While employees would still have received their entitlements no matter which way the deal went, Virgin’s longevity evidently remains a more attractive option to all.
Friday’s decision has thus saved Virgin from the scrapyard of Australian aviation.
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