Final Virgin Australia bids key test for ailing airlines

Bloomberg

The final bids for Virgin Australia Holdings Ltd will show how much appetite private investors really have for an airline industry that’s been battered by the coronavirus pandemic.
Private equity firms Bain Capital LP and Cyrus Capital Partners LP made final and binding offers for the airline on Monday, administrator Deloitte said in a statement. The Australian carrier collapsed in April under A$6.8 billion ($4.7 billion) of debt after the government declined to step in.
Deloitte, which aims to secure a deal by the end of June, didn’t disclose the value of either proposal. It received interest in the airline from more than 20 suitors before most of them fell away.
The auction of the second-largest airline in Australia, a market dominated by Qantas Airways Ltd, is a key moment for an industry facing more than $84 billion of losses worldwide this year because of Covid-19 and related travel restrictions. Until now, carriers have been kept on life support largely with state-backed loans and bailouts of at least $123 billion.
Whoever wins the bid, Virgin Australia’s prospects are uncertain and business travel likely will be curtailed for years, said Warren Staples, a senior lecturer in management at RMIT University in Melbourne. “There might be a gap between what they pitch and the reality of what happens,” Staples said.
Deloitte said Cyrus and Bain envisaged operating a “smaller, single-branded domestic and short-haul international airline that also has growth potential.” Both bidders have received
approval from Australia’s Foreign Investment Review Board, Deloitte said. Spokespeople for Cyrus and Bain declined to comment before Deloitte’s statement.
Cyrus promised to keep the airline’s headquarters in Queensland, according to people familiar with the matter who declined to be identified because details of the bid haven’t been made public. That pledge followed lobbying by Australian states including New South Wales and Victoria for prospective buyers to relocate the business, which had about 10,000 workers before the pandemic struck.
Virgin Australia lost money for seven consecutive years before it finally succumbed to a near-halt in revenue. New Managing Director Paul Scurrah’s plan to cut costs, simplify the fleet and lighten the debt burden was quickly overwhelmed by the outbreak.