Two US-based capital equity and investment giants – global colossus Bain Capital and lower-profile Cyrus Capital Partners – have been shortlisted to take over Virgin Australia, with bidding expected to be north of $3.5 billion.
Airline administrator Deloitte confirmed Bain and Cyrus as dual and duelling finalists for the final round, with the clock now ticking on their "firm and binding" proposals to be submitted to Deloitte by June 22 with the winner to be chosen by the end of June.
Local hero BGH Capital, along with low-cost champion Indigo Partners and Canada's Brookfield – which was a late re-entrant to the process – all failed to make the cut.
Bain Capital's squad is spearheaded by Aussie director Mike Murphy and includes former Bain exec and Jetstar CEO Jayne Hrdlicka, who would likely move into Virgin Australia Mk II as either CEO or Chairman.
New York-based Cyrus emerged as a surprise 'outsider' but has solid connections with the Virgin mothership and Sir Richard Branson as a cornerstone investor in the launch of Virgin America.
"Both Bain Capital and Cyrus Capital Partners are well-funded, have deep aviation experience, and they see real value in the business and its future," Deloitte's Vaughan Strawbridge said in a statement this afternoon.
"We will now spend the coming weeks facilitating in-depth bidder engagement with the stakeholders of the business and work closely with both preferred bidders in the lead up to binding final offers being received. It is still the intention to have a binding agreement in place by 30 June, which remains unchanged."
Transport Workers Union National Secretary Michael Kaine, who represents the airline's 9,000 employees, said the decision was "an important moment towards what we hope will be a successful transition for Virgin."
"The administrators are saying that both of the short listed bidders are committing serious capital to the airline and with ambitions to get back to a full service airline. It is now up to the final bidders to show they can follow through on their commitment to ensure the best outcome for the Australian community and Virgin workers."
The shape of Virgin 2.0
Bain is said to be leaning towards the new Virgin Australia as being closer to a mid-market airline, while Cyrus wants it to remain close to the current full-service model.
Bain's Murphy has previously said that he wants to bring back some of the Virgin Blue vibe to Virgin Australia "and make flying fun again" while Cyrus is understood to be more closely aligned to the recovery plans of Virgin Australia CEO Paul Scurrah.
However, in both cases Virgin would relaunch as a domestic-only operation – the most realistic short-term option, given the impacts of the coronavirus – flying a smaller fleet of Boeing 737s to a pared-back network of destinations in an effort to streamline costs and operations.
International flying would gradually return as demand recovers, and Cyrus is on-board with plans to replace Virgin's Boeing 777 and Airbus A330 jets with Boeing 787 Dreamliners.
Deloitte's Strawbridge has previously noted that discussions with bidders were “focusing around keeping the business together and bringing Virgin as much out of administration in its current form as we can" – indicating that the new Virgin Australia is more likely to resemble the old one, rather than spear off in the direction of being a low-cost Virgin Blue 2.0 play.
Sir Richard Branson's Virgin Group has held discussions with both Bain and Cyrus is understood to be ready to support the winning consortium with a cash injection to help recapitalise the airline, along with dropping or steeply discounting his annual $15 million Virgin brand franchising fee at least over the next few years until the airline is back on its feet and back in the air.
The Queensland Government is also likely to join the winner's circle to ensure that Virgin Australia remains based in Brisbane, with the state-owned Queensland Investment Corporation's 'Project Maroon' looking at that "a direct equity stake, a loan, guarantee or other financial incentives."