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Not a Virgin: Bain plays everyone in breathtaking corporate bait

Private equity firms, such as Bain, are renowned as ruthless owners of assets with profits being their first, second and third priority.

The aviation industry had been waiting for the other shoe to drop at Virgin – they just hadn’t expected it to be a steel-capped boot.

And so was set in motion one of the most breathtaking corporate bait and switches in memory.

Everyone was played.

This included the unions, the staff, Scurrah, the customers and Deloitte – the administrators that had chosen Bain’s $3.5 billion bid in part because it promised to protect the maximum number of jobs, retain Virgin’s culture, most of its routes and its positioning as a full-ish service carrier.

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Bain’s marketing pitch to all stakeholders was that Virgin would be a hybrid product – containing business and a lower cost economy element. It was supposed to sit somewhere between Qantas domestic and Jetstar.

In doing so Bain received the support of the staff which it needed to vote in favour of its ownership.

It’s now becoming increasingly clear that Virgin will re-emerge post-COVID as a budget airline with lip gloss.

Of course there will be howls of protest from Bain and Deloitte at that suggestion. But sources inside Virgin, who wished to remain anonymous, told this columnist months ago that Virgin 2.0 would look a lot more like Jetstar than the pre-administration Virgin.

It’s now becoming increasingly clear that Virgin will re-emerge post-COVID as a budget airline with lip gloss.

Meanwhile, it would be simplistic to characterise Scurrah as naive. He knew that given Bain had included Hrdlicka as part of its consortium, there was a decent chance he would fall victim to a management overhaul.

The unions trusted him to negotiate a fair deal for staff but their faith in Virgin’s management under Bain has been tested over the past month as various enterprise bargaining agreements proposed by the company have involved cuts of up to 40 per cent in the wages of pilots and cabin crew.

For the unions, the appointment of Hrdlicka represents their worst nightmare. While chief executive of Jetstar she was widely known for playing industrial relations hardball.

There have never been any assurances from the Bain camp that Hrdlicka’s role would be confined to a board position. Indeed over the past month there have been numerous whispers her role would have an executive flavour.

Equally, Bain repeatedly gave Scurrah its blessing as the chief executive over the past six months.

Insiders say that Scurrah was on board with the hybrid structure but not on board with taking Virgin back to its budget airline roots.

Hrdlicka’s most recent role as chief executive of dairy company A2 came to a sudden end in December after a disagreement with the board around the implementation of the company’s strategy.

Her statement at the time said, “There have been unforeseen changes in my personal circumstances in the very recent past and they must take priority at this time.”

It will be Hrdlicka’s job to manage what is expected to be another round of compulsory redundancies. Neither Qantas nor Virgin have landed on the appropriate staffing levels that will be needed when flying resumes.

Qantas is also set to have some uncomfortable discussions with its unions about ratcheting down pay and conditions. The good news for Qantas is that it appears it will have a clear run at the large-corporate market and may win back some of the larger business accounts it lost to Virgin under its previous chief executive John Borghetti.

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