Virgin Australia (VA, Brisbane Int'l) has taken a step closer to a relaunch with the announcement that Bain Capital will become its new owner. Virgin Australia Holdings’ administrator Deloitte said on June 26 that it would work closely with the US private equity group on its vision for taking the business forward.

Bain confirmed it had agreed with Deloitte to buy Australia’s second-biggest airline for an undisclosed sum. Its offer was chosen over both a rival bid by Cyrus Capital and a debt-to-equity recapitalisation proposal that Virgin Australia bondholders had put forward.

Bain’s offer includes plans to strengthen Virgin’s regional services, plus an emphasis on value for leisure customers while continuing to serve business travellers. It supports the carrier’s current management team.

Virgin Australia has about 9,000 employees, but Bain Capital aims to keep only 5,000 to 6,000 of them and operate 60 to 70 of its B737 aircraft, Mike Murphy, a former Olympic diver who led Bain’s bid, told The Australian Financial Review. The airline could break even by February, he added.

According to the ch-aviation fleets advanced module, Virgin Australia currently operates sixty-two B737-800s along with two B737-700s and seven ATR72-600s. Sister carrier Virgin Australia International (VA, Brisbane Int'l) operates six A330-200s, fifteen B737-800s and five B777-300(ER)s. Meanwhile, Virgin Australia Regional (Perth Int'l) has a fleet of six A320-200s and thirteen Fokker 100s.

“This is a great day for Virgin Australia and a huge milestone as we move forward with Bain Capital,” said Paul Scurrah, Virgin Australia’s managing director and chief executive. “Bain Capital has spent many hours over the past weeks speaking to us and getting a deep understanding of our business and working to secure a deal with our administrators.”

He added that “it was always the goal to bring our airline out of administration as quickly as possible in a stronger financial position” and the announcement will “secure thousands of direct and indirect jobs and ensure we can continue to bring competition to millions of customers for many years to come.”

An estimate on returns to creditors has not yet been made, but an update on this issue will be given ahead of a creditors’ meeting in August, the administrator said according to Reuters. At the meeting, the deal with Bain must be approved by at least 50% of creditors by number and 50% of them by value.

But before any return to creditors can be finalised, a large number of contracts with suppliers and lessors must be renegotiated, an unnamed source told the news agency.

A spokesman for the 6,000 unsecured bondholders, who are owed AUD2 billion Australian dollars (USD1.38 billion), insisted that even as Virgin Australia works with Bain, they would continue to push for consideration of their own proposal.

Without naming its source, the newspaper The Australian reported that Bain would inject AUD600 million (USD413 million) of cash upfront, another AUD600 million to cover passengers’ travel credits, and AUD450 million (USD307 million) to cover provisions for employees.