© Reuters. FILE PHOTO: A rainbow from a passing rain shower sits over Virgin Australia aircraft at Sydney airport in Australia
By Jamie Freed
SYDNEY (Reuters) – Virgin australia Holdings Ltd (AX 🙂 creditors voted Friday to buy the second largest Australian airline by US private equity group Bain Capital, said Administrator Deloitte, paving the way for a strategic overhaul.
The deal allows the air carrier to emerge from the voluntary administration it received in April for A $ 7 billion ($ 5 billion) in creditors after demand plummeted due to the coronavirus pandemic.
The Bain deal offers unsecured creditors a return of 9% to 13% on their investment and, according to Administrator Deloitte, includes a financial commitment of A $ 3.5 billion, according to which Virgin shares will be sold to private equity by October 31. Group should be transferred.
Mike Murphy, managing director of Bain Capital, said in a statement the purchase approval is a major milestone in the airline's recovery.
As part of Bain's business plan, Virgin plans to cut a third of its workforce as part of an overhaul to focus on being a domestic and short-haul international Boeing Co. (N 🙂 737 operators competing against Qantas Airways Ltd (AX :).
Paul Scurrah, Virgin's chief executive, said Wednesday that the airline is likely to give some market share to Qantas if it exits unprofitable routes.
Prior to the pandemic, Virgin had spent a decade evolving from a low-cost airline into a full-service rival for Qantas, competing for business travelers. However, this came at the expense of years of losses.
Virgin will continue to seek corporate deals but plans to market itself as value for money rather than chasing large accounts at all costs, Scurrah said at the CAPA Australia Pacific Aviation Summit on Wednesday.
"Travel budgets will be under more pressure than ever when things come back," he said. "Our lower cost base allows us to compete more aggressively as value carriers."
($ 1 = 1.3759 Australian dollars)
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