News & Discussion: Adelaide Airport & Airlines

[OlympusAnt]

I haven't actually. Maybe I should lug myself over to it sometime.

[Patrick_27]

I haven't actually. Maybe I should lug myself over to it sometime.

Definitely do. Really well designed, considering they built half around the old terminal and then demolished the old terminal to built the other half. Not sure how they'll go if they ever need to expand but they have built in features for international services and have managed to secure Singapore and Qatar.

[Ho Really]

Two of four Virgin bidders in recent financial strife
Patrick Hatch / Business reporter at The Age and Sydney Morning Herald.
Sarah Danckert /Sarah Danckert is a business reporter.
May 18, 2020 — 3.49pm

Two of the four final bidders vying to take over Virgin Australia are involved in carriers that have recently collapsed or needed government bailouts, raising concerns about whether they have the financial strength to ensure the airline's long-term future.

It comes after the $800 billion Canadian investment powerhouse Brookfield walked away from the sale because it believed it was too complicated to be finalised by an August deadline unless administrators Deloitte limited the second round of the process to just two bidders.

New York-headquartered investment fund Cyrus Capital, US private equity firm Bain Capital, local fund BGH and American budget airline owner Indigo Partners have moved through to the second round, sources close to the process said.

Deloitte's lead administrator Vaughan Strawbridge would not confirm which parties had proceeded, but said he was "delighted by the strength of each of those on the shortlist".

Cyrus Capital was a surprise addition to the final field, chosen from about eight indicative bids submitted on Friday. The distressed debt specialist has close ties to Virgin Australia co-founder Richard Branson, launching Virgin America together before Alaska Air bought it in 2018.

Cyrus, Virgin Atlantic (51 per cent owned by Mr Branson) and aviation group Stobart Group bought the British regional airline Flybe in February 2019 with a plan to rebrand it Virgin Connect.

However, the directors of the company, including Cyrus founding partner Lucien Farrell, put the airline into administration in March this year after it was unable to secure a £100 million ($188 million) government bailout. The parent company, Connect Airways, also in administration, owes creditors £56 million, including £6.6 million to staff, according to documents filed with the UK’s corporate registry.

The Arizona-based budget airline owner Indigo Partners has also been hit hard by the coronavirus, with its US carrier Frontier Airlines participating in a sector-wide bailout by the Trump administration. Another of its carriers, Hungary-based WizzAir, recently received a bailout from the UK government by way of a £300 million soft loan.

“You would have to say there is a question about that, how you can go from asking for and accepting government support to wanting to buy another airline," said one well-informed observer of the Virgin sale process.

Mr Strawbridge defended his shortlist and said he was "comfortable with who our bidders are... and we’re comfortable with their financial capacity and their experience”.

He also rejected the criticism of Deloitte's handling of the sale that has seen Brookfield walk away, saying the administration was "not a popularity contest". He said the June 12 deadline for binding bids could be moved back if bidders were not ready by then.

"We’ve got more interest than we expected and the process is working and the parties we’ve got shortlisted are massively engaged and are keen to work with us," Mr Strawbridge said.

Meanwhile, speculation is mounting about the intentions of some of the bidders, with sources saying BGH has put in a bid for all of Virgin but is really interested in selling off the crown jewel – its Velocity program. Bondholders were only tapped in November to buy back a stake in Velocity for $700 million.

All of Indigo's investments are in ultra-low cost carriers and it is not clear if it would want to maintain Virgin as a full-service airline or perhaps is interested in Virgin's budget arm TigerAir. Indigo owned 24 per cent of Singapore's Tiger Airways when it set up its Australian offshoot, which Virgin later bought.

Bain, which has $US105 billion ($165 billion) in assets under management, is being advised by former Jetstar boss Jayne Hrdlicka and restructuring experts KordaMentha, which managed the Ansett insolvency two decades ago. The group also has a close relationship with Mr Branson through their recent cruise liner joint-venture business Virgin Voyages.

There’s a chance that some of the spurned bidders could re-emerge as potential suitors as the Deloitte-run process continues, with sources saying both InterGlobe and Brookfield are sitting on the sidelines waiting for an opportunity.

SMH

Cheers

[Ho Really]

And a snippet from .Business Insider Australia.

The Arizona-based Indigo Partners owns stakes in the low-cost carriers including America’s Frontier Airlines, European group Wizz Air, South America’s JetSMART and Mexico’s second-largest airline Volaris, and has been interested in Virgin for several years.

All Indigo’s airline investments are in ultra-low cost carriers and it is not clear if it would want to take a similar approach with Virgin if it is the successful bidder.

Cheers

[dsriggs]

The SA Tourism Youtube page uploaded this yesterday


So, considering the closed borders to the Eastern states, there may be good news for Adelaide-Auckland upcoming.

[Ho Really]

Bidder Bain outlines ‘hybrid’ plan to revive struggling Virgin
By Damon Kitney
Victorian Business Editor
12:00AM May 29, 2020

Bain Capital is considering relaunching Virgin Australia as a hybrid airline, sitting between a full-service and a low-cost carrier, which would continue to fly regional routes and internationally in future, with the potential backing of Sir Richard Branson’s Virgin Group.

In a wide-ranging interview with The Australian, Bain Capital’s Sydney-based managing director Mike Murphy also revealed the firm wanted to make changes to Virgin’s Velocity frequent flyer scheme and said Bain had already engaged with unions, the Queensland government, federal government adviser Nicholas Moore and the Foreign Investment Review Board about its Virgin bid.

The Boston-based private equity group is one of four bidders that have been asked by Virgin’s administrator Deloitte to submit “second-round” indicative bids by Friday night ahead of the shortlist being cut to two over the weekend.

The others are a consortium involving BGH Capital and the $170bn AustralianSuper; New York-based Cyrus; and Phoenix-based Indigo Partners, which is partnering with Oaktree Capital Management.

Canadian infrastructure investor Brookfield, which is the majority owner of Oaktree and was not part of the Virgin shortlist following its concerns over aspects of the bidding process, is continuing talks with the administrator Vaughan Strawbridge.

Mr Strawbridge is said to be keen for Brookfield to return to the process and it is understood Brookfield Australian managing partner Len Chersky and Mr Murphy had an introductory discussion ahead of first-round bids being lodged earlier this month.

Brookfield had been the preferred bidder identified by the Transport Worker’s Union before it dropped out of the process.

“At the moment I think we and others are keeping to ourselves. From an ability to fund this transaction perspective across our private equity and credit funds there is plenty of firepower, so we don’t need additional capital to be able to write the cheque,’’ Mr Murphy said when asked about working with Brookfield.

“Brookfield I assume is the exactly same, they are a giant … They have the ability to do big transactions on our own. Clearly this coming Friday is a real milestone and we are hoping to be one of the final two. We will assess how the landscape looks early next week.”

Bain has a team of 60 advisers working on the Virgin deal — a single Zoom meeting last week had more than 50 people online — and on Friday it will submit a 12-page document to Deloitte with its proposal to resurrect Virgin.

Mr Murphy said Bain, which has about $10bn of its $150bn global portfolio invested in Australia after he established the firm’s Sydney office in 2016, had Virgin on its radar for some time ahead of its collapse into administration.

Bain has been involved in several aviation recapitalisations, including Atlas Air, America United and Northwest.

“We didn’t approach the company or its advisers before administration. But 30 minutes after it was announced, I was on the phone to Deloitte to express our interest,’’ Mr Murphy said.

There has been ongoing speculation that Bain will adopt a low-cost carrier model for Virgin after it said on Sunday it wanted to bring the “fun” of the initial Virgin Blue low-cost culture back to the company.

Unions and others have warned this could lead to lower choice in the market and hand the bulk of international tourist traffic and all corporate and government demand to Qantas.

It could also undermine the value of the Velocity program and have implications for Virgin’s employees, tourism, corporate customers, and the regulators.

Mr Murphy said the “facts are out there and they are public” that the full-service era for Virgin under former chief executive John Borghetti was a much less profitable period for the business.

“At the moment we are still evaluating where the positioning of the business should be vis a vis Qantas and Jetstar. It is too early for us to declare whether full service is the winning strategy or low cost is the winning strategy,’’ he said.

“It might be some blend of both that could make the most sense. But we are still evaluating.”

Presentations to the bidders by chief executive Paul Scurrah have highlighted the savings in Virgin moving to a “single aircraft type” fleet of Boeing 737s, which Mr Murphy said Bain “definitely” supported.

Mr Scurrah has also proposed that the airline in future buys a fleet of long-range Boeing Dreamliner 787 aircraft to replace its current Boeing 777 and A330 international fleet. Mr Murphy said he would not rule out a Bain-owned Virgin continuing international services.

“We are analysing route by route performance and viability and it is clear there is quite a spread of health within the international routes. They have done a good job with LA; Hong Kong has been much tougher. So we are going through it route by route to try to determine what makes sense.

“There also has to be a time-phased approach to this as well,’’ he said.

He described Virgin’s regional services as “very important”.

“A lot of regional performs really well. That is great. Where the performance isn’t as strong, I guess our lens is ‘What can we do about that?’,’’ he said, noting Virgin could find partners on those routes.

“As a category we agree that regional coverage is very critical.”

He said the Velocity Frequent Flyer business, now 100 per cent owned by Virgin after it bought out its private equity partner last year, had more potential.

“One thing we would love to explore is whether there could be a closer brand relationship between Virgin and Velocity. We come at that from the customer experience; having those tied up a little closer could be a more seamless experience from both the web and app perspective for customers,’’ he said, noting one option would be to have one common app and website for both brands.

High hopes

Deloitte and Virgin management have told bidders that the relaunched business could make $1.2bn at the EBITDA line in the 2022 financial year, which would be Virgin’s first full 12-month reporting period following the COVID-19 outbreak.

“It is ambitious, that is for sure,’’ Mr Murphy said of the forecast.

“I like the fact Paul … and the team are shooting for the stars. (But) it has to be put in the context of what the business has earned in past five years (which is between $800m and 900m). I love the aspiration. We are starting to tease apart whether we think that is too aspirational or not enough. But what I will say is it is more than the business has achieved before.”

Bain and Virgin Group have a joint venture in the cruise industry with Virgin Voyages, while rival bidder Cyrus invested with Sir Richard in Virgin America in 2005 after he established the airline.

Mr Murphy said Bain would definitely retain the Virgin brand and revealed there were discussions on the nature of the current agreement with the Virgin Group and “what that should look like on the other side”.

Virgin Australia was paying Sir Richard about $15m a year to use the Virgin brand before it collapsed.

“We have a close institutional relationship with the Virgin Group. There is a good relationship of trust. We would be very interested in the Virgin Group being a shareholder in this business alongside us,’’ Mr Murphy said, before noting it was up to Virgin whether they wanted to retain their current 10 per cent interest.

He said Bain had also held “brief introductory conversations” with Virgin investors Singapore Airlines and Etihad relating to their current alliance agreements with the Australian airline.

Bain has also drafted in Goldman Sachs, Virgin’s long-time adviser, on its bid. Mr Murphy said its role focused on providing valuation advice — especially longer-term advice on key valuation metrics, and how they changed over time and through cycles.

“Really it’s to give us more confidence in, when we do eventually exit, what range of valuation multiples could we realistically expect,’’ he said.

While the Future Fund is an investor in Bain’s offshore private equity funds through the more than $26bn it invests in the asset class, Mr Murphy said it would be unlikely it would play a direct co-investing role in Bain’s Virgin bid in the way AustralianSuper has joined with BGH.

“We are off working out which pockets of capital this gets funded from. But conceptually both the private equity funds and the credit funds would combine and it would be a combination of US funds and Asia funds. But sitting behind all that from an investor perspective is a significant amount of Australian capital,’’ he said.

Mr Murphy is one of the 15 partners who manage Bain Capital’s suite of Asia Private Equity Funds, which have collectively raised $US11.5bn. There are no country-specific allocations from the funds.

Rival bid

BGH has championed the “Team Australia” composition of its bidding group, especially with the involvement of AustralianSuper, in its discussions with Deloitte.

However it will still need to get Foreign Investment Approval for its bid given its significant foreign backers, including the Singapore government’s investment arm Temasek, which owns Singapore Airlines.

Mr Murphy said Bain submitted its application to FIRB a week ago but was hopeful that given Virgin was more than 90 per cent foreign-owned when it collapsed, there would be no onerous conditions placed upon any of the bidders.

“The administrator is trying to have FIRB somewhat expedited so there are no conditions precedent as it gets to the implementation deed point. We are pushing that along as well.

“We have been through FIRB lots of times,’’ he said. Business Council of Australia president and former MYOB chief executive Tim Reed, who knows Mr Murphy from Bain’s investment in the accounting software group for more than seven years, said foreign ownership considerations should be secondary in the Virgin sale process.

“The most important thing here is that Australia ends up with two domestic airlines to serve the nation and keep competition in the market. Whether that 90 per cent (foreign ownership) goes up and down is not really important compared to the ambitions and capabilities of the owner to make this a sustainable business.”

Mr Murphy said Bain had its first discussions with the Queensland government this week after it offered a $200m sweetener to any bidder prepared to guarantee the airline kept its headquarters in Brisbane, where more than 8000 of Virgin’s staff are based. He said Bain was also open to talks with other state governments.

While he said there had not been any substantive discussions with the federal government, he was hopeful it would continue to assist the embattled aviation sector through route and JobKeeper subsidies.

“We are not holding out hope for a bespoke Virgin-only support package,’’ he said, noting there had been “a little bit” of dialogue with former Macquarie Group chief Nicholas Moore, who is the government’s “emissary” in the sale process.

“We are staying in touch to make sure we are abreast of what is happening. But they have not been substantive conversations,’’ he said.

Mr Murphy was one of 2000 applicants for a role at Bain & Company in 2002, fresh from his commerce-law degree at Bond University. Following a seven-stage interview process he was one of the seven successful candidates that year.

Before that, at the age of 18, he famously placed fourth in the 3m springboard diving competition at the 1992 Barcelona Olympic Games. Two years later he won two gold medals at the Commonwealth Games.

Asked what diving taught him for his corporate life, he replied: “Not accepting the conventional wisdom of what is possible. It gave me a lot of confidence I could step into a whole new level of what I thought was possible … pushing through that status quo.”

Tim Reed described Mr Murphy as “highly competent, thoughtful and considered”.

“There is a touch of humility in him. But clearly he is very accomplished. I have never detected a sense of arrogance in him,’’ he said.

Asked how Mr Murphy would cope with Bain’s surprise move into the public spotlight this week, Mr Reed replied: “He would be probably having a combination of excitement about the impact and the opportunity that this investment could provide for him personally, Bain and for Australia, but there would also be some degree of nerves about doing something he hasn’t done before.”

So why did Bain throw away its traditional playbook and break cover this week at such a crucial point in the Virgin bidding process?

Mr Murphy agreed it was unusual but said it was about correcting a perception about private equity — that it was looking for a “quick flick” of Virgin — as well as talking up its credentials as an investor in aviation and reassuring the company’s staff, unions and other stakeholders.

“We wanted to make the point we see this opportunity as a long-term commitment. This will take some work, multiple years to get the business back up to the strength that it was.

“We wanted to make it clear we are long-term investors. We can speak to plenty of examples of where we have had investments for 8-10 years,’’ he said.

“We are (also) often reported as a US private equity giant. We want to make it clear there is a bunch of people with Australian accents that live in Australia that are driving our Australian business as well as the strength of the global firm.”

He said Bain’s advisers in Australia were “hands-on” with their investments, although critics of the group have claimed it has little equity capital invested in the country.

“If anything Bain Capital versus our peers has kept a very low profile, probably more so that we should have in some circumstances. So we talked about this (going public) and we thought it was important to do it in the context of a very public situation,’’ he said.

But what if the pitch fails and Bain is not one of the two final bidders named by Deloitte early next week?

“It would disappointing and we are really focused on getting there,’’ Mr Murphy said, noting Deloitte had flexibility to change the process if it needed to, so all would not be lost.

“We are just trying to take an agile approach. The process at the moment has been clearly laid out. If that changes, we will reassess if we can morph into it. We are flexible,” he said.

But as Bain lodges the latest iteration of its bid, failure is the last thing on Murphy’s mind.

“There is a lot of work going on and a lot of people working around the clock,’’ he said. “We feel we can be a great partner for the airline.”

The Australian

also...

Brookfield to come back into the bidding for Virgin Australia
By Damon Kitney
Victorian Business Editor
Glenda Korporaal
Associate Editor (Business
6:48PM May 29, 2020

The race for control of Virgin Australia has taken a new twist after Canadian infrastructure company Brookfield Asset Management lodged a surprise bid for the airline on Friday, on the condition that its administrators provide more time to restructure the collapsed airline.

The Weekend Australian understands that the Toronto based Brookfield, which last year made a $4bn takeover of private hospitals operator Healthscope, was actively encouraged to lodge a bid on Friday by unions, other creditors and Virgin management — which are keen to see the interests of Virgin staff better protected in the sale.

But Brookfield, which has remained in active discussions with administrator Deloitte’s Vaughan Strawbridge since surprisingly dropping out of the official process two weeks ago, is pushing for the timeline to be redrawn and for Mr Strawbridge’s initial deadline of June 30 to be scrapped.

Mr Strawbridge on Friday received more comprehensive non-binding proposals from the four official short-listed parties, after their initial round of non-binding indicative offers two weeks ago.

These are a consortium of BGH and the $170bn AustralianSuper, the high-profile Bain Capital and two US bidders, New York based Cyrus Capital and Arizona based Indigo.

Brookfield had dropped out of the official bidding process after expressing concerns that the official timeline — which was initially to see binding bids lodged by June 12, with a winner chosen by the end of June — was too tight.

The short-list of four official bidders is expected to be reduced to two by Monday, with binding bids expected to be made by mid-June with the winner to be chosen by the end of June.

The New York based Cyrus Capital appears the most likely to drop out of the race after being short-listed following Brookfield’s surprise withdrawal two weeks ago.

“They (Cyrus) were a late entrant to the party and were only brought in when Brookfield dropped out,” one source told The Weekend Australian.

Brookfield’s re-entry into the race on Friday brings in more competitive tension but could well delay the process at a time when Virgin’s cash position is under close scrutiny, with 90 per cent of its fleet grounded due to the COVID-19 crisis. It could also prompt legal action from rival bidders.

Although it is not one of the officially chosen short-list of four, Brookfield believes that the administrators should only go forward with serious discussions with two parties after early next week.

“Brookfield has been encouraged by many parties to participate because we have done a lot of work and these parties believe it will best protect the interests of the employees,” a source close to the group told The Weekend Australian on Friday.

“We put forward a bid on Friday which outlined the basis upon which we will engage. If that is something the administrator wants to pursue, we will engage.”

Brookfield is understood to want to undertake a month of work to restructure the airline, which would include the renegotiation of enterprise bargaining agreements with the unions, the simplification of the Virgin fleet with aircraft owners, and discussions with airports and other creditors.

While it wants changes to the current timeline, it believes the process can still be concluded in time for creditors to vote on the sale at their next meeting, which is scheduled for August 22.

It is also believed to be prepared to work with other bidders if it will expedite the process.

This is less likely to include the BGH/AustralianSuper consortium as the two have clashed in the past over deals such as Healthscope.

Brookfield is also said to be keen that Virgin maintains a significant fleet of aircraft and will not work with bidders which will dramatically downside the fleet.

The Australian reported on Thursday that Bain Capital’s Australian managing director, Mike Murphy, held introductory discussions with Brookfield Australia’s Len Chersky before first-round bids for Virgin were lodged earlier this month.

Brookfield has also previously sought further certainty from the administrators about how they would fund the airline if their $100m cash position runs out at the end of June and were concerned that the liability would be left with the successful bidder after final bids were lodged.

It remains concerned about this issue.

Brookfield is understood to be a strong supporter of Virgin management led by Paul Scurrah, and has the support of the Transport Workers Union, which is keen to see as many bidders as possible in the race for the airline which went into administration on April 21 with debts of almost $7bn.

The national secretary of the TWU, Michael Kaine, which represents most of Virgin’s 10,000 strong workforce, said he welcomed the move by Brookfield as “a good thing”.

“Brookfield is a serious bidder. It has a track record of building infrastructure around the world.

“Having them in the mix is a positive for the process.”

The TWU is also concerned at potential bidders which could seek to turn Virgin into a low-cost carrier, which could see a loss of jobs.

It also believes that as a purely low cost carrier, Virgin would struggle to compete against the already formidable Qantas/Jetstar combination.

The re-entry of Brookfield into the process could see three possible bidders emerge next week or a separate Brookfield proposal being put to creditors in August.

Mr Strawbridge said in a statement on Friday that the “competitive tension that had resulted from the process to date confirmed all parties had a genuine interest in the future of Virgin Australia and saw real value in the business”.

He said the groups which had put in bids for Virgin on Friday were a “strong group of well funded parties” which also had “significant aviation experience”.

“All have done an enormous amount of work to get to this point and the level of engagement with each has been strong.”

He said administrators had held close to 100 meetings with bidders and stakeholder groups including unions and governments.

The proposals lodged on Friday would be reviewed over the weekend, with a final short-list of “two preferred parties” to be settled upon early next week.

Mr Strawbridge said the he would not speculate on the dollar value of the bids being discussed.

“There is some speculation out there on what dollar value bidders might be placing on the business,” he said.

“This is just speculation and we won’t know what that value might be until binding offers are required in mid-June.”

He said the process from next week, after the two short-listed parties are chosen, would see “further engagement with stakeholders and aircraft financiers as they seek agreements on future terms ahead of binding bids being received”. That process “would be just as intense and defined by an ongoing focus to deliver the best possible commercial outcomes for creditors and see Virgin Australia restricted and out of administration as a strong and sustainable airline.”

Brookfield is advised by former Virgin staffer and former senior Wesfarmers executive David Baxby, who was a non-executive director of Virgin Australia from 2006 to 2017 and a director of its frequent flyer arm, Velocity, from January 2017 to August 2017.

The TWU is continuing to press the federal government to step into the process to supply some minimum guarantees to provide certainty for the bidders.

While a potential five bidding parties are now believed to be interested in Virgin, the union has been concerned that bidders could still drop out of the process if it drags on and there are no guarantees by the federal government to provide them with some certainty about the airline’s potential to ramp up after it comes out of administration.

Additional reporting: Robyn Ironside
The Australian

Cheers

[Stefan P]

Evening all,

Singapore airlines will begin a 1x weekly passenger flight between Singapore-Adelaide from June 9

Singapore Airlines and SilkAir are increasing the number of destinations that will be covered by their passenger network, as well as the frequencies on some existing services, in June and July 2020.

Reinstated scheduled services include flights to Adelaide, Amsterdam, Auckland, Barcelona, Brisbane, Cebu, Christchurch, Copenhagen, Hong Kong, Medan, Melbourne and Osaka. Please click on the links below for the full flight schedules.

All flights are subject to regulatory approvals. Please note that these schedules are subject to changes. Customers will be informed of schedule changes via SMS and email, provide your contact details in Manage Booking.

Please note that all other flights that had been originally scheduled from June to July 2020 but are not listed in the schedules will be cancelled.

With today's announcement, SIA has cut approximately 94% of the passenger capacity that had been originally scheduled for June and July 2020 due to the Covid-19 outbreak. SIA and SilkAir will continue to adjust our capacity to match the demand for international air travel.

Customers whose flights were cancelled by SIA or SilkAir will retain the full value of the unused portion of their tickets as flight credits. They will also be awarded bonus flight credits when rebooking their travel.

Information on Singapore Airlines travel waiver policy may be found here. We will continue to provide updates as the situation evolves. For responses to frequently asked questions on our travel waiver policy, please click here.

Customers only need to submit their rebooking requests in the Covid-19 assistance request form when their new plans have been firmed up, and our customer service agents will contact them. Customers with tickets issued by travel agencies should contact their agents for assistance.

The Civil Aviation Authority of Singapore (CAAS) has announced that travellers will gradually be allowed to transit through Singapore’s Changi Airport from 2 June 2020. Singapore Airlines will announce its plans for these transfer lanes when they have been finalised. Please note that until then, Singapore Airlines customers will not be able to transit through Changi Airport.

Info from: https://www.singaporeair.com/en_UK/sg/m ... d=k88gnin9

Flights will arrive/depart Adelaide on June 9, 16, 23, 30 & July, 7, 14, 21, 28

SQ279 ETA 0755
SQ278 ETD 0910

[Ho Really]

Virgin Australia: Cyrus Capital makes Virgin final round with Bain Capital
By Glenda Korporaal
Associate Editor (Business)
Damon Kitney
Victorian Business Editor
John Durie
Senior Writer/Columnist
2 hours ago June 2, 2020

Two foreign bidders will go head to head in the battle to rescue Virgin Australia after New York-based hedge fund Cyrus Capital Partners, which has had strong links to Virgin founder Richard Branson, surprisingly emerged alongside frontrunner Bain Capital in the final shortlist of bidders chosen by the airline’s administrator, Deloitte.

Coming late to the bidding process for Virgin, Cyrus effectively knocked out a strong bid from a consortium led by BGH Capital and the $170bn AustralianSuper, which at one stage had been considered a frontrunner in the bidding race.

The BGH/AustralianSuper consortium had been advising Virgin before the airline went into administration on April 21 with debts of almost $7bn.

The fourth bidder was Arizona-based low-cost carrier investor Indigo.

In a statement issued on Tuesday, administrator Vaughan Strawbridge of Deloitte said both Bain and Cyrus had been selected because they were well funded, had “deep aviation experience” and saw “real value in the business and its future”.

But he left open the possibility of other players coming back into the race “in some capacity with the remaining parties”.

Bain and Cyrus now have less than two weeks to finalise binding offers due on June 12, with the final bidder to be name by June 30.

The Australian understands that BGH’s bid was subject to several conditions, the most significant being commitments from the federal government, including to facilitate competition in the local aviation market following the devastating impact of the coronavirus pandemic.

Others involved financing and other issues.

“The conditions were on matters of substance rather than process and related to what would need to be achieved to make the airline profitable,” said one source with knowledge of the BGH ­proposal. It is understood BGH will accept Deloitte’s decision and not consider any legal avenues to return to the process.

“The only scenario they would now return under would be if one of the shortlisted bidders could not complete and the administrator contacted BGH,” the source said.

At this stage it is understood AustralianSuper is also not planning to return to the process.

Bain Capital put forward what one source described as a “very clean bid” with minimal conditions that suited Mr Strawbridge’s very tight time frame.

Mr Strawbridge is seeking to have no conditions attached to the binding implementation deal it will sign with the successful bidder at the end of the month.

Bain will now be under significant time pressure to secure agreements with aircraft lessors, unions and other significant creditors before June 30 or come to a final agreement with Deloitte that provides for adjustments to its bidding process if certain outcomes do or do not occur after June 30.

Bain is expected to relaunch Virgin Australia as a hybrid airline in the mould of the old Virgin Blue with a lost-cost base but offering airport lounges, a more integrated Velocity frequent-flyer program and regional, domestic and eventually international services.

Speaking to The Australian last week, after saying Bain wanted to “make flying fun again”, Bain Capital’s Sydney-based managing director, Mike Murphy, revealed that his firm wanted to make changes to Virgin’s Velocity Frequent Flyer scheme.

Bain is expected to negotiate to bring the Velocity and Virgin brands together in ongoing talks with Virgin Group, which currently receives about $15m a year in royalty payments from the Australian carrier.

“One thing we would love to explore is whether there could be a closer brand relationship between Virgin and Velocity,” Mr Murphy said.

“We come at that from the customer experience. Having those tied up a little closer could be a more seamless experience from both the web and app perspective for customers,” he added.

Mr Murphy noted that one option would be to have one common app and website for both brands.

He said Bain would retain the Virgin brand and revealed he would welcome Virgin Group as an ongoing shareholder in the airline following ongoing discussions on the nature of the current arrangement with Virgin Australia and “what that should look like on the other side” of the sale process.

He said the Velocity Frequent Flyer business, now 100 per cent-owned by Virgin after it bought out its private equity partner last year, had more potential.

Bain has had a team of 60 advisers working on the Virgin deal and has been assisted by former Jetstar chief executive Hayne Hrdlicka, who would be viewed as a candidate for the chief executive role or as an executive director of the relaunched airline.

The decision was made after lengthy talks over the weekend and on Monday and Tuesday morning with the final four bidders.

All the bidders put in more detailed bids on Friday.

One question that will need to be answered is the future role of Canadian infrastructure group Brookfield, which has continued to remain interested in Virgin, although it pulled out of the running for the shortlist two weeks ago over concerns over the process.

Brookfield submitted its own indicative, non-binding bid for Virgin on Friday.

Brookfield was not on the shortlist of four, but has retained a strong interest in the process and has had strong support from the union movement.

Brookfield told Deloitte on Monday that it needed the deadline to be extended by two weeks.

While Deloitte initially supported this position, it was concerned when Brookfield insisted this meant they needed to put back the deadline for final documentation by a further fortnight.

Deloitte told all the bidders in strong terms over 72 hours of negotiations that it wanted to be “off risk” by June 30, although it now appears to have secured more cash, which could keep Virgin running until August.

In its indicative bid made last Friday, Brookfield indicated that it was prepared to inject more than $500m in cash into the airline to get it flying again.

Mr Strawbridge said the administrators would now spend coming weeks “facilitating in depth bidder engagement with the stakeholders of the business and work closely with both preferred bidders in the lead up to binding offers being finalised.”

The Australian

[Ho Really]

Richard Branson’s link to Virgin bidders Cyrus and Bain Capital
By Glenda Korporaal
8:40PM JUNE 2, 2020

The emergence of New York-based hedge fund Cyrus as one of two well-funded shortlisted parties in the race for Virgin on Tuesday confirms Virgin founder Richard Branson will play a role sometime in the future of the airline.

Little is known in Australia of Cyrus and its plan for Virgin except for its long-running ties with Branson. Cyrus founder and managing partner is the well connected Stephen Freidheim. A Yale graduate, Freidheim is a board member of the Council on Foreign Relations, chairman of the executive committee of the Peterson Institute for International Economics and a board member of the US Olympic Committee since early 2012.

With offices in New York and London, Cyrus, which was founded in 1999, manages some $US4bn in funds. Cyrus has maintained a low-key profile with regard to its Australian bid, but it seems its large chequebook played a big part in it being shortlisted.

Asked what was the main reason behind Cyrus’s surprise selection, one observer said on Tuesday night: “Money.”

Having made the shortlist, Cyrus will now have to become more public about its plans for Virgin, if not with the media then at least with interested parties such as the unions and possibly state and federal governments.

The other question is its ties with Richard Branson.

Cyrus’s ties with Branson date back to 2005 when it became an investor in Branson’s proposed Virgin America. Branson’s Virgin Group announced plans to launch a US carrier in 2004 but it needed US investors because of US law prohibiting foreigners from controlling more than 25 per cent of an American airline.

Virgin America got off the ground in 2007, jointly controlled by the Virgin Group and Cyrus, the two together holding 54 per cent of the airline. The stake was sold to Alaska Airlines in 2016 for $US2.6bn, netting Cyrus and Branson a nice profit.

But the opposite occurred more recently when Branson and Cyrus got the band back together in late 2018 to buy loss-making British regional airline Flybe. Branson’s Virgin Atlantic teamed up with Cyrus and Irish wet lease specialist Stobart Air in a consortium called Connect Airways.

The deal was finalised in February 2019 with Virgin Atlantic holding 30 per cent of the capital of Connect with Cyrus holding 40 per cent and Stobart Air taking another 30 per cent.

But the investment in Flybe, which at its peak operated 40 per cent of domestic British flights, proved to be a disaster with the already financially stretched airline hit by the impact of COVID-19 flight cut backs earlier this year.

Talks were held with the British government in February about granting Flybe a £100m ($183m) rescue loan but ministers in the Johnson government rejected the application.

With the Connect investors opting not to put any more money into it, Flybe went into administration on March 5.

Two weeks later Connect itself entered into administration.

Branson still in the race

On the face of it, Cyrus could be seen as ensuring that Branson is still in the race somewhere.

But Branson also has ties with front runner Bain, which was confirmed as one of the two finalists on Tuesday, and fifth-running Brookfield, which was not in the official shortlist but joined the other five bidders in making another indicative bid on Friday to Virgin administrator Vaughan Strawbridge.

Bain Capital has a joint venture in the cruise industry with Virgin Voyages.

Branson could link up with Bain Capital or Cyrus if either emerges as the leading contender to buy Virgin.

Another Branson connection in the Virgin bid is Branson’s strong links with former Wesfarmers executive David Baxby who was working with the Brookfield consortium. Baxby knows Cyrus from his days as a non-executive director of Virgin America from 2009 to 2013.

He was a non-executive director of Virgin Australia from early 2006 to August 2017, and a director of Velocity Frequent Flyer from 2016 to 2017. He left it to join Wesfarmers as a senior executive, a role he left earlier this year.

His previous connections with Branson also include being co chief executive of the Virgin group from November 2011 to July 2013.

While Baxby has been advising Canadian infrastructure company Brookfield, it is not out of the question that Brookfield could find its way back into the race if, say, it chose to link up with Cyrus.

Branson’s Virgin Group had some 10 per cent of Virgin Australia before it was placed into voluntary administration on April 21 with debts of almost $7bn.

The Virgin Group has a vested interest in having ties with the winning bidder; it receives some $15m in fees a year from Virgin Australia for the right to use the Virgin brand.

Cyrus may well be the rabbit to keep front runner Bain honest, giving its best offer in the race to June 12 when binding bids are due. Either way the Branson connection with Virgin and its many interested parties seems set to continue.

The Australian

Cheers

[Stefan P]

Evening all,

Cathay Pacific will begin freight flights to Adelaide starting next week, for 6 weeks

"Mr Ridgway announced in State Parliament on Tuesday that Hong Kong airline Cathay Pacific would also start flying freight out of Adelaide from next week for an initial period of six weeks."

Info from: https://www.adelaidenow.com.au/news/sou ... r4oEyYUZK8

[AdelaideGold]

Apparently Singapore is flying an A380 once per week

[floplo]

Apparently Singapore is flying an A380 once per week

"A Singapore Airlines Airbus A380-900 aircraft will provide a once-weekly service to Adelaide."

Except that Singapore Airlines doesn't list an A380-900 in its fleet, only an A380-800 and an A350-900..... https://www.singaporeair.com/en_UK/us/f ... our-fleet/
I'd bet that it's an Advertiser typo supersizing an A350 into an A380.....

Update: Singapore Airlines website lists an A350, so indeed a typo

[rev]

Virgin sale is down to two, a group linked to Branson and a US group.

[PeFe]

Both bidders for Virgin are US hedgefunds.

https://www.abc.net.au/news/2020-06-02/ ... l/12308938

[rev]

Apparently airlines are getting ready to increase domestic capacity to 15%, currently its arouns 5%.

If airlines are getting ready to do this, there must be an easing pf border restrictions around the corner, which ties in with word that there'll be an announcement very soon regarding our state border.

About damn time if true.