Boston-based Bain Capital has won the bid for Virgin Australia; following the withdrawal of Cyrus Capital’s competing offer. Bain has vowed to keep thousands of jobs and strengthen Virgin’s business model to ensure continued viability.
Expansion and Retraction of Services
Mike Murphy, Managing Director of Bain Asia-Pacific, has promised to drastically overhaul Virgin’s current regional network. In a statement, Mr Murphy hinted that the new Virgin will axe unprofitable routes and commence new regional services.
“Under our ownership we will strengthen Virgin’s regional services and ensure the airline emerges offering exceptional experiences at great value while continuing to service business travellers, as well as those of us travelling for fun or to visit loved ones.”
Mike Murphy, Managing Director, Private Equity, Bain Capital Asia-Pacific
In the near future, Virgin Australia will expand its small regional network to rival Qantas and Regional Express. Possibly using ATR 72-600 turboprops, the airline will likely introduce and improve services to remote towns in New South Wales and Queensland; the plan may also be to grow mining charter services in Western Australia using Fokker 100s. Mr Murphy has also expressed eagerness to work with Alliance Airlines, to ensure reliability for mining services.
“Middle-Market” Airline
Bain has proposed a new future for Virgin Australia, likely resulting in a middle-market airline positioned between Qantas and low-cost subsidiary Jetstar. Keeping with a middle-market model, Virgin Australia is likely to ground any long-haul international routes in the near and perhaps distant future.
In order to truly compete with Australia’s flag-carrier, Qantas, Bain will likely seek to make Virgin a strong competitor on short-haul domestic routes (such as Sydney-Melbourne). In order to achieve this, Virgin Australia will offer competitive prices and improved schedules; in an attempt to tap into the elusive business travel market.
By refocusing Virgin’s market, Bain will be able to restructure the airline to recommence services to New Zealand if a travel bubble is established. Qantas’ enormous international network has proven to be its “Achilles Heel,” resulting in mass-groundings and job cuts.
By axing or reducing unprofitable routes to Hong Kong and Los Angeles, Virgin Australia will eliminate unnecessary risks associated with COVID-19 travel bans and the economic impact in the future.
Fleet Overhaul
Virgin Australia‘s current fleet is likely to be significantly downsized, with six Airbus A330-200 aircraft to be returned to lessors. In addition, Virgin’s five Boeing 777-300ERs will remain mothballed until adequate demand for USA services resumes.
In a confidential plan acquired by the Sydney Morning Herald, Bain Capital outlined the purchase of eight Boeing Dreamliners (787-9 or 787-10) to replace the B777s and A330s.
In simplifying Virgin Australia’s fleet, Tigerair will never relaunch. After the low-cost subsidiary ceased operations, pilots and cabin crew were made redundant; they are unlikely to be rehired under Bain’s control.
Workers to be Made Redundant
Despite vowing to preserve as many jobs as possible Virgin Australia is likely to furlough approximately 2000 workers, according to analysts. The Transport Workers Union has previously expressed doubts about Bain’s commitment to Australian employees.
“Virgin workers are under no illusion that there are tough times ahead. Bain will be wanting to make sure that they put a competitive airline in the air. So it is going to be difficult.”
Michael Kaine, Secretary, Transport Workers Union (via The World Today)
Bain Capital has also promised to uphold any worker entitlements, although the firm is not legally obliged to keep any workers. The Australian Government may need to financially intervene in the future, according to the Australian Council of Trade Unions.
Virgin Australia’s headquarters will remain in Brisbane, following an agreement between Virgin and the Queensland Government.
What do you think about the proposed changes? Let us know in the comments.
Tigerair will have its wings in the waitings. Just you wait.
I am quite certain, that most major markets require:
ULCC airline
standard or premium LCC or a hybrid service airline
inbound market FSC
outbound market FSC
BAIN is Batik Air Indonesia, isn’t it? If it is, oh, it’s gonna do so well. For Singapore Airlines, making the Virgin brand work in Southeast Asia has been a long time coming. Temasek Holdings does a lot of the research and groundwork before allowing Branson to lauinvch anything. Singapore AIrlines has always viewed Virgin as the brand it would gladly adopt should it need to give up its own brand, which it will, very soon.
Actuallly, I was involved in a branding thingy as a brainstorm.
The idea for VIrgin was to design a brand, where tthe own airline can take and do whatever they wante
The idea for Virgin was to develop a brand, ort series of brands, that communicated to customers about the brand’s message. These airlines were to be based in special internatonal free trade zones (these were former countries that are ppopular with visitors), with Ireland, Hainan, SIngapore, Japan, New Zealand amongst pother. These included V AIr,, Volaris, VIstara, VietJet Air, etc etc whatever airline starts with V, is a Singapore Temasek Holdings supported, Delta and Hainan, Emirates, JetBlue, and Indigo partner, is part of the Virgin cinematic universe.
They are co confident, that they think if they revived those V brands, the masses will like it,and for Australia, this was expressed in the Ansett Australia 2000 livery. Now ya see the brilliance?
Virgin may or may not survive the takeover. But rest assured Bain will make money off the deal. Lots of it.
They don’t call these places Vulture Capital firms for nothing. They buy distressed businesses, install their people on the board of directors, and begin cutting everywhere to maximize profits for themselves. And to ensure they make even more money, they charge the companies they own exorbitant “management fees”.
Virgin will definitely look different under Bain, but whether it’s successful or not really doesn’t matter to them. They just want to make money for themselves.
Sad I’ll miss Virgin, streets ahead of QF and a. Freeway I front of Jetscare. Wonder if the new DJ will still continue to offer a B/C product
“Using ATR72-600s turboprops” is that a direct quote from from Mike Murphy of Bain or is that your prediction?
Considering the current state of Virgin’s regional fleet, the ATR’s will be the obvious mainstay of regional flights to small country towns (737’s are not flown from Sydney to Albury-Wodonga)! But we will see what Mike Murphy announces in the coming weeks.
“In the near future, Virgin Australia will expand its small regional network to rival Qantas and Regional Express. Using ATR 72-600 turboprops, the airline will likely introduce and improve services to remote towns in New South Wales and Queensland.”
So which is it champion? They WILL expand but only LIKELY introduce more services? Put away the crystal ball and go tidy up your bedroom.
It’s a different concept: Virgin will expand, but has provided no exact picture of the routes. Based on what regional aviation is in Australia, they will likely expand into NSW and Qld
will Virgin continue to fill the need of direct flights from Tasmania to Perth, WA? There are many ex WA people now living here but still having family and other ties with WA, I have 2 sons and 8 grandchildren in WA. Without those flights Tasmanians are forced to go via Melbourne incurring at least an extra 2 to 3 hours, sometimes more , in transit and waiting times at Melbourne. Thank you.
Unsure at this stage – hopefully these details will emerge in the coming weeks
Melbourne to Ballina-Byron seems a hot route that Jetstar has to itself, that Virgin could give a good run off
Tiger crew were made redundant. Not furloughed. Sadly there is a huge difference, they will never be recalled unlike a furlough.
I would like to know if virgin will continue to do feight under the new owners