Virgin Australia acquired by Bain Capital will reduce its B737 fleet by a third

Report by : Gan Yung Chyan, KUCINTA SETIA

According to Virgin Australia on 9 September 2020, it will return one-third of its Boeing B737 aircraft to leasers, etc., as part of its new owner Bain Capital's restructuring plan.

A Virgin Australia spokesperson said that before entering voluntary management in April this year, the company had renegotiated financing terms for 56 of its 85 737 aircraft, and other aircraft would withdraw from its fleet. The spokesperson said: "Once demand resumes, we will increase the number of Boeing 737 aircraft to 75."

On 4 September, Bain Capital of the United States was approved to acquire Virgin Australia at a transaction price of 3.5 billion Australian dollars (approximately RMB 17.4 billion), paving the way for its strategic restructuring. Due to the sharp drop in demand due to the new crown epidemic, Virgin Australia entered voluntary bankruptcy management in April this year, owing approximately US$5 billion to creditors. According to Deloitte Accounting Firm, Bain’s acquisition provides unsecured creditors with a return on investment of 9% to 13% and promises to provide $2.5 billion in funding. Deloitte said that Virgin's shares should be transferred to Bain before 31 October.

According to Bain’s business plan, Virgin Australia plans to lay off one-third of its workforce, or 3,000 people, and terminate long-distance routes from Australia to Los Angeles and Tokyo and abandon its wide-body aircraft business.

Qantas said last month that as Virgin Australia reduced its aircraft size, as the market recovers, it expects its domestic market share to rise from 60% before the pandemic to 70%.

As Australia has imposed border restrictions to limit the spread of the pandemic, both airlines are currently operating basic domestic flights.