Bain buys Virgin Australia in bet on shattered industry

Bloomberg

Bain Capital LP agreed to buy collapsed airline Virgin Australia Holdings Ltd in one of the biggest single bets on the industry since it was shattered by the coronavirus pandemic.
Administrator Deloitte named Bain as the airline’s new owner, hours after rival buyout firm Cyrus Capital Partners LP withdrew its bid.
The value of the deal wasn’t disclosed, though Deloitte said there will be “a significant injection of capital” into the airline.
Virgin Australia’s shareholders, including some of the biggest names in aviation such as Singapore Airlines Ltd were wiped out.
Bain’s investment is a brave bet on a sector enduring its biggest crisis ever, as well as on the Virgin Australia business itself, the country’s second-biggest airline. Larger rival Qantas Airways Ltd depicted a bleak outlook, cutting 6,000 jobs, grounding about 100 planes and raising as much as A$1.9 billion ($1.3 billion) to survive a prolonged downturn.
While domestic travel is slowly recovering, Australia’s government has said the country’s borders could be kept largely closed until 2021. Airlines worldwide are likely to lose $84 billion and see their revenues halve this year, according to the International Air Transport Association, which expects 2020 to go down as the worst year financially in the history of aviation.
Virgin Australia collapsed in April under A$6.8 billion in borrowings as the outbreak halted global travel. Even before coronavirus-related restrictions nearly froze revenue, Virgin Australia had lost money for seven consecutive years.
The airline started as a low-cost domestic carrier in 2000, before destroying its balance sheet trying to compete
with Qantas as a full-service operator with routes to the US and Asia.
When it went under, Virgin Australia employed about 10,000 staff and operated 144 aircraft, generating almost 80% of its revenue from domestic flights. It had pushed back delivery of Boeing Co 737 Max jets to July 2021, when it expected to receive the first of the 48 it had on order.
Deloitte said it’s still not possible to determine how much of Virgin Australia’s debt can be recovered, though more details will come in a report to creditors that’s due before the end of August.
Shareholders, though, can expect nothing, Deloitte said. Virgin Australia was almost entirely owned by foreign aviation groups.