Pressured by collapsing air travel demand due to the coronavirus pandemic, Virgin Australia Holdings Ltd’s creditors have agreed to the purchase of Australia’s second-largest airline by Boston-based private equity group Bain Capital. The deal will mean the carrier will exit many of its international routes and shed about 3,000 job.
The carrier filed for bankruptcy protection in April, the largest airline to date to do so, carrying a debt of A$7 billion ($5 billion). According to a statement from the airline’s administrator Deloitte, the agreement will allow the carrier to pursue a strategy to reemerge as a value carrier.
The A$3.5 billion ($2.5 billion) deal gives unsecured creditors a return of 9 to 13 percent of their investment. Deloitte said Virgin shares should be transferred to the private equity group by Oct. 31.
The airline’s major shareholders are Singapore Airlines and Etihad Airways, along with Chinese investment conglomerates Nanshan Group and HNA Group. Sir Richard Branson, who co-founded the airline in 2000, still holds a 10 percent stake.
Bain’s business plan calls for Virgin Australia to return to its roots as a low-cost carrier, cutting a third of its workforce and refocusing on domestic and short-haul international routes, operating Boeing 737 aircraft. The shift will likely cede some market share to full-service rival Qantas Airways as Virgin exits unprofitable routes.
Although the plan calls for the airline to downsize, Paul Scurrah, the chief executive of Virgin Australia Group, said the sale is important for the future of both the carrier and the country’s travel recovery.
“It’s vital for Australia to have two major airlines for consumer choice, value airfares, and to help support the recovery of Australia’s robust tourism sector after this crisis is over,” Scurrah said in a statement.