Voluntary Administration of Virgin Australia

By Purav Bhandare, Carta Ryan, Corey Sullivan and Gleb Kuznetsov (University of Queensland); Ivan Chung and Kevin Lee (Hong Kong University of Science and Technology)


Overview of the deal

Acquirer: Bain Capital or Cyrus Capital Partners

Target: Virgin Australia

Estimated Enterprise Value: A$3.5bn – A$4.0bn

Administration Date: 04/21/2020

Acquirer Advisors: Bain Capital advised by Goldman Sachs, Cyrus Capital Partners advised by McGrathNicol

Target Administrator: Deloitte advised by Houlihan Lokey and Morgan Stanley

Seven years of consecutive losses combined with the impact of COVID-19 forced Australia's second-largest airline, Virgin Australia, into voluntary administration on the 21st of April, 2020. In 2019 Virgin held just over 30% of domestic market share. After the first auction, Deloitte shortlisted four parties for the auction's second round: Bain Capital, BGH Capital, Indigo Partners, and Cyrus Capital Partners.

Company Details (Target - Virgin Australia)

Virgin Australia began services in 2000 as Virgin Blue, a cheaper alternative to Qantas Airways Ltd and Ansett Australia who were, at the time, dominators of the Australian airline industry. However, Ansett entered administration in 2001, primarily due to an inefficient fleet, and was liquidated in 2002. In 2011, CEO John Borghetti relaunched Virgin Blue as Virgin Australia and began re-shaping the company's business model to become a serious competitor to Qantas. In doing so, Virgin's preceding reputation as the young, low-cost carrier (LCC) was replaced with a focus on targeting corporate and business customers by introducing expensive lounges and other services, while making losses.

Founded in: 2000

Headquartered in: Brisbane, QLD, Australia

CEO: Paul Scurrah

Number of Employees: 10,620

Market Cap: A$726m

EV: A$4,908m

LTM Revenue: A$5,874m


LTM EV/Revenue: 0.84x


As an operational overview, in FY2019 Virgin Australia reported a loss of A$315.4m, stating that subdued economic conditions, higher fuel prices, and a weaker Australian dollar negatively affected their performance. Paul Scurrah replaced John Borghetti as CEO in Feb 2019, who introduced several strategic initiatives:

  • Deferring Capex by restructuring the order of Boeing 737 MAX aircrafts

  • Reducing capacity by 1.5% due to subdued market conditions

  • Organisational rightsizing program - reduction of 750 corporate and head office roles, lowering costs by A$75m annually

  • Renegotiating key contracts such as aircraft leases, maintenance agreements, etc., targeting A$50m in cost savings annually

Nonetheless, the global imposition of mass travel restrictions globally finally pushed Virgin over the edge; after seven years of consecutive losses totalling A$1.9b from FY2013 to FY2019, Virgin Australia has finally entered voluntary administration.

"The government is not going to bail out five large foreign shareholders with deep pockets who together own 90 per cent of this airline"
– Josh Frydenberg, Treasurer of Australia