Virgin Australia’s administrators have released a 7-point pitch, along with a three month sales timeline, as more than ten potential investors express interest in purchasing the embattled airline.
Deloitte’s Vaughan Strawbridge, one of Virgin’s administrators appointed following the airline’s entry into voluntary administration earlier this week, has indicated that the recapitalisation process “is about working with a very sophisticated number of interested parties to map out and plan and get the restructuring through in the shortest amount of time,” as “the intent is to run hard.”
Further insight into what the rapid and intensive strategy entails has been revealed by The Australian Financial Review, with the new form of a restructured airline, weighed down by over A$5 billion in debt, to be released to interested parties by early May. Subsequent preliminary offers will be accepted into mid-May, before binding, serious offers will be required by mid-June 2020.
Deloitte has indicated that a final signing of purchase contracts is intended to be completed by the end of June, establishing an envisaged timeline for the completed sale of Virgin Australia within three months.
The central sales pitch for the airline revolves around its placement as a major challenger brand in Australia, with access to the highly profitable ‘Golden Triangle’ air corridor – Sydney, Melbourne and Brisbane, along with the well-established and profitable Velocity Frequent Flyer program that will be sold as part of the package. Many of these remarks were distilled into a 7-point pitch for potential investors.
Virgin’s 7-point sales pitch
- Attractive two player domestic market with proven profitability
- Strong ongoing demand for domestic air travel (long distances between major cities, limited alternative transport options, tourism destination)
- Strategically valuable access to routes and slots in the “Golden Triangle”, historically one of the most profitable operating jurisdictions globally for air travel
- Highly cash generative and distinguished Velocity Frequent Flyer loyalty model, in excess of 10 million members and 90 partners
- Key strategic assets and infrastructure, including aircraft, route network, airport gates/slots, built over 20 years
- Unique opportunity to ‘relaunch’ Virgin Australia with a sustainable capital structure post COVID-19
- Strong support from government, regulators and unions – have all expressed a desire to keep Virgin flying following recapitalisation
“More than ten” potential buyers circle
Both local and international investors are said to be interested in purchasing Virgin following its extensive restructuring process, involving the dissolution of some of its multi-billion dollar debt and a realignment of other expenses, including aircraft leases and existing contracts.
Virgin Group’s Sir Richard Branson has expressed interest in remaining part of the airline, indicating that he remains in close contact with administrators and reportedly has offered up to $250 million if the Australian Government was to also offer support.
Other interested parties are believed to include Australian private equity firm BGH Capital and Macquarie Group, who has previously been involved in offers to purchase Qantas during the mid-2000s.
