IndiGo’s bid to acquire Virgin Australia. Win or lose?

On April 21 2020, Australia’s second-largest carrier Virgin Australia has voluntarily declared its administration to be ‘collapsed’, making it Australia’s first big corporate casualty of the coronavirus pandemic. It was already struggling with a long-term $5bn (£2.55bn; $3.17bn) debt and seeking for potential buyers and investors after failing to get a loan from the Australian government.

Virgin Australia chief executive Paul Scurrah said: “Our decision today is about securing the future of the Virgin Australia Group and emerging on the other side of the Covid-19 crisis. Australia needs a second airline and we are determined to keep flying.”

Virgin Australia held around 31% shares in the domestic flight market. It employs about 10,000 people directly and another 6,000 through ancillary businesses. The part of the carrier is owned by a number of entities including the UAE government, Singapore Airlines, China’s HNA, and Sir Richard Branson’s Group. Before the shutdown, Virgin Australia had flown about 130 aircraft to 41 destinations – mainly domestic routes, but also international services including New Zealand, Bali, Fiji, Tokyo, and Los Angeles.

Consulting firm Deloitte is now aiding as a financial administrator to Virgin Australia to restructure the firm’s debt, pay off the creditors, and find a buyer. Virgin Australia and its administrator Deloitte have shortlisted four parties who could end up being the new owners of Australia’s second major carrier.

Here’s what we know about them and how they may run an airline if they carry through and win the bid.

1. Bain Capital: Boston-based Bain Capital is one of the world’s leading private investment firms with about $US105 billion ($163 billion) in assets under management.
2. BGH Capital: Melbourne-based BGH Capital, headed by Ben Gray, is a $2.6 billion fund and one of the largest private equity funds that are focused on Australia and New Zealand.
3. Indigo partners: Phoenix-based Indigo Partners is a private equity firm with a focus on aviation. It was co-founded by Bill Franke and has set up a number of ultra-low-cost airlines around the world.
4. Cyprus Capital Partners: New York-based investment advisory firm Cyrus Capital Partners was established by Stephen Freidheim in 1999.

The global aviation sector has been hit hard this year. As a result, various countries including India, have suspended air travel and given pause to flying to avoid the spread of coronavirus. Meanwhile, IndiGo has cut the salaries of its senior employees for the entire 2020-21 by up to 25 percent.

Will COVID-19 favor Indigo to win this Bid?

Let’s wait and watch till the final bids are due on June 12.

–

Subhash Surve,

Aerostat Aviation 

Source:

‘Virgin Australia’.

‘article by TT. Bureau to The Telegraph dated 16 May 2020’.

‘article by Nassim khadem to ABC news dated 19 may 2020’.