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A New Era: Day One Of Bain Capital Owned Virgin Australia

Today sees Virgin Australia's (VA) new owners, Bain Capital officially take up the reigns and begin what will undoubtedly be a transformative and likely revolutionary V2.0 era for the 20-year old Australian carrier.

Today sees Virgin Australia’s (VA) new owners, Bain Capital officially take up the reigns and begin what will undoubtedly be a transformative and likely revolutionary V2.0 era for the 20-year old Australian carrier.

21st birthdays are historically symbolised by celebrating the beginning of adult life and being gifted the ‘keys to the house’ in the process.

So the question is, come next year when they do hit the big 21, will Bain Capital have re-established VA as a financially responsible and ‘mature’ airline to counter the $6.8 billion debt they started it with?

Here’s some factors worth noting to take into your own guesswork for the year ahead.

1. A new CEO for a new beginning

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Jayne Hrdlicka, Virgin Australia CEO (formerly Jetstar)

On October 15, Virgin Australia’s administrators (Deloitte) announced that Paul Scurrah had resigned as Chief Executive Officer and Managing Director and would depart in early November once the sale of the airline to Bain Capital was finalised. Though it’s now believed Mr Scurrah will be staying on until late January as a consultant.

Deloitte also confirmed at the time that former Jetstar CEO Jayne Hrdlicka would be appointed as VA’s new CEO.

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Paul Scurrah, Former CEO, Virgin Australia

The announcement was a controversial one at the time, with rumours of Mr Scurrah’s imminent departure circulating long before the initial deal went through and many senior executive departures following on.

In a statement released after the announcement, the Transport Workers Union (TWU) also said “We sincerely hope that the veil of secrecy and background shenanigans on display over the past few days is not repeated. Trust must be at the heart of Bain’s dealings.”

Today officially sees day one on the job for incoming CEO Ms Hrdlicka with Bain Capital rumoured to be implementing a cost-cutting plan including a reduction in operating routes.

Will Ms Hrdlicka be able to galvanise the company and get the culture back on track in such trying circumstances?

2. Flight credits and staff payments have been honoured

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On August 25, Virgin Australia administrators Deloitte announced details of what Bain Capital intended to offer the group’s 10,000-plus creditors (including staff) as part of its proposed purchase of the airline.

The very good news for ‘priority creditors’ and employees was that the new owners said they will receive 100% of their owed entitlements.

As per the previous Bain Capital new ownership announcement made on August 5th, customers and travel agents would be notified directly of any associated flight cancellations.

At the time, the announcement also stated that any Tigerair Australia customers and those affected by any cancellations would be provided with a travel credit for use on Virgin Australia operated services.

This was again confirmed at the time, with Deloitte saying: ‘Under the sale of the Virgin Group to Bain, at the completion of the sale, Virgin Group will provide you with a new credit for an amount equal to any remaining value on your Conditional Credit (Future Flight credit).’

The group also said that ‘to preserve value for customers with credits for bookings made prior to administration, booking dates would also be extended to 31 July 2022 for travel until 30 June 2023.‘

3. There’s a new value proposition (almost)

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The end of business class? Or the beginning of something new?

Virgin Australia also announced their masterplan on August 5th, with Bain Capital saying at the time it will ‘create a stronger, more profitable and competitive business, building on its unique culture and securing approximately 6,000 jobs as it prepares to exit voluntary administration.’

The lengthy masterplan included retiring Tigerair, pausing long-haul international flights, moving to an all-Boeing 737 fleet for domestic and short-haul operations and maintaining Velocity points and credits.

There’s been much rumour and controversy of the finalised details since though, with talk of a hybrid airline and a low-cost carrier to rival Jetstar banded around.

Karryon understands there will be an announcement from Virgin Australia on the new customer value proposition in the next couple of days.

4. Welcome to the new HQ!

Flight Centre HQ

After reporting that Virgin Australia ‘may’ have been in talks with Flight Centre Travel Group about taking up some of the travel company’s Brisbane HQ following the freeing up of space due to COVID-19-related job cuts, it turns out the rumours were true after all.

Virgin Australia announced at the end of July that they would be taking five floors at Southpoint in Brisbane to form a new head office in September.

Ok, so while VA is not actually on the same floors as Flight Centre Travel Group, there have been rumours of a sharper commercial deal being done to help sell more VA seats and create a win-win for both parties.

The Queensland government confirmed in October that it would invest $200 million to ensure the airline keeps its headquarters in Brisbane for at least the next decade.

5. New alliances

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Speaking of alliances, they are absolutely the future when it comes to post-COVID travel operational success. Fittingly then, Virgin Australia is hoping to take on Qantas with a little help from Brisbane based regional carrier Alliance Airlines.

While Alliance Airlines may have flown under the radar in recent years, they’re probably the fastest-growing airline in Australia right now, with 14 new jets on order and a host of new regional routes in the works.

Including their new Canberra – Sunshine Coast – Cairns sector which began a couple of weeks ago.

Virgin and Alliance are currently seeking approval from the Australian Competition & Consumer Commission (ACCC) to code-share on 40 regional routes and two international routes.

It’s also worth noting that Qantas bought a 19.9% stake in Alliance in 2019, making it the largest single shareholder, a move which itself sparked an investigation by the ACCC. As of June 2020, the ACCC said the investigation is continuing.

The ACCC will make a decision on an interim authorisation for Virgin Australia and Alliance Airlines in the next couple of weeks.

VA’s other code-share arrangements with airlines including Etihad Airways, Delta, Singapore Airlines and Air Nippon Airways (ANA) currently remain on hold due to COVID-19 travel restrictions, though Velocity members will continue to receive reciprocal Frequent Flyer benefits, including earning Points and Status Credits when they fly.

6. You can’t keep a good thing down

Last week, VA launched it’s ‘You Can’t Keep A Good Thing Down’ marketing campaign which featured a 12-year-old schoolgirl from Melbourne and 2020 America’s Got Talent finalist, Annie Jones.

Virgin Australia General Manager Brand & Marketing, Michael Nearhos, said You Can’t Keep A Good Thing Down is all about bringing to life the excitement of flying with Virgin Australia again.

“You Can’t Keep A Good Thing Down has two meanings – it’s not only a nod to Virgin Australia looking to the future but it’s also about giving travellers confidence that, after a period of uncertainty, the Virgin Australia they know and love is up there flying again, and here to stay.”

Virgin Australia General Manager Brand & Marketing, Michael Nearhos

To celebrate the launch of the campaign, Virgin Australia dropped over half-a-million fares from just $75* on selected routes, in their ‘Go You Good Thing’ sale on until midnight AEDT Friday 20 November.