Virgin Australia Holdings’ creditors have agreed at an online meeting to sell the indebted carrier to Boston-based private equity group Bain Capital, opening the way to restructuring that will recreate it as a value-based airline, cut 3,000 jobs, and end many of its international routes.

As part of the deal, unsecured creditors will be paid a return of 9% to 13% for their claims, the airline said in a statement on September 4. In total, creditors are owed about AUD7 billion Australian dollars (USD5.1 billion).

The transfer of shares to Bain is expected to be completed by October 31. The deal, which involves a financial commitment of AUD3.5 billion (USD2.5 billion), will allow Virgin Australia Holdings to emerge from voluntary administration - which it entered in April - and implement a strategic overhaul of the company.

Under the private equity firm's business plan, the group, which consists of Virgin Australia (VA, Brisbane International) and its subsidiaries, Virgin Australia International and Virgin Australia Regional, will cut a third of its workforce and orient towards becoming a domestic and short-haul international operator competing with Qantas (QF, Sydney Kingsford Smith).

“It’s vital for Australia to have two major airlines for consumer choice, value airfares, and to help support the recovery of Australia’s robust tourism sector after this crisis is over,” Virgin Australia Group CEO and managing director Paul Scurrah said in the statement.

Before the approval was announced, on September 2, Scurrah commented at an online industry conference that Virgin Australia is likely to cede some market share to Qantas as it withdraws from unprofitable routes.

“I do expect we will lose market share because there are routes that weren’t making any money. There will be markets where we do want to hold our own. We are looking at it market by market rather than nationally,” he said, as quoted by Reuters.

In August, Qantas said it expects its domestic market share could rise to 70% from a pre-pandemic level of 60% as Virgin downsizes its fleet.

However, Scurrah cautioned: “We’re not putting numbers on the starting fleet. We need to be flexible. With the arrangement with lessors, we can do that.”