Is Virgin Australia out of the woods now that it has a buyer?
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After two months in administration Virgin Australia (ASX:VAH) found a buyer in US private equity firm Bain Capital.
The airline was forced to enter administration in late April with border closures decimating demand. But it was plagued by financial difficulties for some years prior to its fall.
On Friday it was confirmed that Bain Capital would buy the airline as it sought to find its feet again.
“Bain Capital has spent many hours over the past weeks speaking to us and getting a deep understanding of our business and working to secure a deal with our administrators,” Virgin boss Paul Scurrah said.
“Bain’s investment will cement our future as a major Australian carrier, secure thousands of direct and indirect jobs and ensure we can continue to bring competition to millions of customers for many years to come.”
While Bain is yet to comment on its planned purchase of the troubled airline, it previously expressed an interest in taking Virgin Australia back to its Virgin Blue roots.
In particular it pointed to the laid-back culture that helped the airline stand out in the market when it first began.
Bain also promised it was in it for the long haul knowing aviation faced a long road back to normal.
While Virgin Australia is slowly ramping up operations similar to Qantas (ASX:QAN), job cuts announced by Australia’s flag carrier sent shockwaves through the industry.
iFLYFlat founder Steven Hui told Stockhead he wouldn’t be surprised to see something similar at Virgin. This was despite Bain and runner up Cyrus promising a bright future.
“I think both bidders want to say it’s going to be a rosy future because they’re trying to buy it,” he said.
“But in light of what Qantas has announced, they are planning adjustments to ensure what they’re buying is going to be profitable – at the end of the day they need to make money.”
However, Hui reiterated he didn’t believe the Velocity program would be changed substantially.
“I believe Velocity will be kept in tact because it is hugely profitable, in a way even more profitable than the airline themselves,” he said.
Virgin’s shares were suspended from the ASX in April. Despite Friday’s announcement investors will have to wait some time yet to know if shares will trade again, if ever.