Cyrus Capital Would Make Sure Virgin Australia Remains Full Service

Another potential owner of a rebooted Virgin Australia has stuck their head above the parapet and outlined their…

Cyrus Capital Would Make Sure Virgin Australia Remains Full Service

Another potential owner of a rebooted Virgin Australia has stuck their head above the parapet and outlined their plans for the airline. New York-based Cyrus Capital is one of four shortlisted bidders for Virgin Australia. Yesterday word leaked out on the private equity group’s ambitions for Australia’s second domestic airline.

Virgin Australia will stay a full-service airline if the Cyrus Capital bid succeeds. Photo: Getty Images

Virgin Australia collapsed in April, having suspended most of its flying and holding around US$4.6 billion in debt.

Cyrus to keep Virgin Australia flying as a full-service airline

The Sydney Morning Herald is now reporting that Cyrus Capital wants to give the region’s dominant carrier, Qantas, a decent competitive poke by continuing to operate Virgin Australia as a full-service international airline.

That will be music to the ears of Virgin Australia’s administrators, Deloitte. Their Virgin Australia point man, Vaughan Strawbridge, is working closely with Virgin Australia’s senior management. They are all keen for the airline to be sold as a going concern and to continue flying largely as is.

Not everyone believes Virgin Australia can succeed as a full-service airline. Photo: Virgin Australia

But most analysts and observers believe this isn’t feasible. Two other shortlisted bidders, Bain Capital and Indigo Partners, have taken the unusual step of outlining their plans for Virgin Australia. But both have flagged taking the airline closer to its low-cost origins.

That only leaves the fourth bidder, local private equity firm BGH Capital, as not having outlined their plans.

A330s and 777s out, Dreamliners in

Cyrus Capital cites unnamed sources connected with the bid saying Virgin Australia would stay roughly the same size as before.  The airline has a fleet of around 130 aircraft with roughly half on expensive leases.

But Cyrus Capital has indicated that many of those leased planes will go back to the lessors, including eight A320s, 14 Fokker 100s, and 14 ATR72 turboprops. Also set to go are Virgin Australia’s fleet of widebody planes, including the six leased A330-200s and the five Boeing 777-300s (one of which is leased).

A successful bid by Cyrus Capital would mean the end of the road for Virgin’s Fokker 100 jets. Photo: Virgin Australia

The private equity group has floated the prospects of replacing the existing widebody fleet with Boeing 787 Dreamliners. That’s what Deloitte and Virgin Australia’s current CEO want the new owners to do. It could be a remarkable coincidence, or maybe not. The sources also indicated some regional routes would go.

Deloitte is shortly due to whittle the existing four shortlisted bidders down to two. This outlining of plans, leaked or otherwise, is a kind of corporate beauty parade, with the various bidders posing and pirouetting before the stakeholders and decision-makers at Deloitte.

But it also offers some reassurance that Virgin Australia will not be broken up or let go bankrupt.

Branson’s fingerprints on this proposed bid

Cyrus Capital was a surprise inclusion in the initial shortlist of four bidders. However, the private equity group has a history of investing in airlines and extensive ties with Richard Branson.  They helped fund Branson’s Virgin America launch in 2005 and teamed up with Virgin Atlantic to buy and rebrand Flybe early in 2019.

Both Richard Branson and Cyrus Capital did okay out of Virgin America, selling it to Alaska Airlines five years ago. Their Flybe play didn’t work out so well.

Richard Branson is reluctant to let go of his Australian aviation interests. Photo: Virgin Australia

Richard Branson is keen to retain a link with Virgin Australia and has ties to more than one of the shortlisted bidders.  It has been noted around Sydney that he’s keeping his options open and an eye on the main chance.

The next round of bids are due by Friday evening (Sydney time).  The existing shortlist will be cut down to two over the weekend. Final, binding bids will be due on June 12 with a proposed deal later put a creditor’s meeting. There are expectations that Virgin Australia will sell for around US$2.5 billion.

Source : Simple Flying More   

What's Your Reaction?


Next Article

Why Did Deltas’ Low-Cost Carrier ‘Song’ Fail?

Delta Air Lines once operated a short-lived low-cost carrier. Called “Song,” the airline flew all-economy Boeing 757s on…

Why Did Deltas’ Low-Cost Carrier ‘Song’ Fail?

Delta Air Lines once operated a short-lived low-cost carrier. Called “Song,” the airline flew all-economy Boeing 757s on leisure destinations– primarily in Florida. However, the airline made its first flight on April 15th, 2003, and shut down in 2006 as Delta restructured through bankruptcy.

Song was once a low-cost carrier brand within Delta. Photo: Getty Images

What was Song?

In the early 2000s, Delta was under threat. JetBlue had just started operations and was winning over a sizable number of passengers flying between New York and the vacation hubs in Florida. A University of Pennsylvania analysis of the low-fare airline noted that the Song 757s would be quite luxurious for its time with leather seats, seatback screens, MP3 music, and sell branded food items onboard its aircraft while also offering low fares– similar to JetBlue.

Song would focus on the leisure travelers between New York and Florida. Before, later, expanding to more Northeastern US and West Coast destinations.

Song 757
A Song Boeing 757 at New York’s La-Guardia Airport. Photo: Aero Icarus via Flickr

Delta notes that at its height in 2005, Song had over 48 Boeing 757-200s flying in its fleet to 16 destinations across the United States. In total, those aircraft flew over 200 flights per day.

Delta shut Song down in 2006

In late-2005, Delta announced that it was discontinuing Song just weeks after filing for bankruptcy, according to the New York Times. This came as the airline just could not become as successful as its employees first dreamed.

For one, the airline-within-an-airline concept is difficult to master. Between pilot and flight attendant agreements, keeping costs down is hard. This is one place where JetBlue had a significant competitive advantage. In addition, Song also ended up flying some lucrative routes– including transcontinental service.

Song LAX
Song was flying to critical cities like Los Angeles. Photo: BriYYZ via Flickr

While airlines coming out of bankruptcy usually emerge smaller, Delta couldn’t trim the Song network. Song flew to many lucrative cities so, even after being wound down, Delta did not pull down any destinations.

What happened to Song’s planes?

In 2006, Delta announced that the Song 757s would undergo retrofits. The 48 757-200s would reenter Delta’s mainline system with a “new two-class domestic long-haul product.” These aircraft flew out of important airports, including JFK, Boston, Fort Lauderdale, Fort Myers, Las Vegas, Los Angeles, Orlando, San Francisco, Tampa, and more. Meanwhile, the 757s also started to make their way to Atlanta, Cancun, Miami, Phoenix, and more.

Delta 757
Delta re-configured Song 757s with a premium product. Photo: Getty Images

The return of First Class on lucrative transcontinental routes meant that Delta could target its staple passengers: loyal business travelers that want a premium product.

Why Song was not a complete failure

Song, itself, was not a complete failure. Delta used the airline brand as a way to test out new ideas. This included zone boarding, new aircraft turnaround times, all-leather seats, designer uniforms, improved snack choices, simplified fare structure, and an upgraded online presence.

The biggest thing, however, that Delta learned was how to build a strong brand. In the years after Song, Delta has continued to make advances in the flying experience. It introduced new long-haul economy-class dining, has continued to maintain on-demand seatback screens on its planes, and retained leisure travel services. In fact, while American has pulled its Orlando to New York-JFK services– one of Song’s key routes– Delta continues to serve the market and expand to more destinations in Florida.

Comfort +
Delta continues to maintain on-demand seatback entertainment onboard its Boeing 757-200s. Photo: Jay Singh – Simple Flying

And, Song ultimately pushed Delta towards a premium transcontinental product. In recent years, the airline has put flatbed seats on key 757 routes and upgraded Los Angeles to New York services to premium Boeing 767 services.

Did you ever fly Song? Do you have memories from Song? Let us know in the comments!

Source : Simple Flying More   

This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies.