Confusion over what Virgin Australia will look like after leadership change

There are concerns Virgin Australia will be gutted and turned into a budget airline, potentially costing more jobs and handing full-service rival Qantas a monopoly, following the resignation of chief executive Paul Scurrah.

Mr Scurrah, the popular boss who steered the company through its most challenging year during COVID-19, will step down amid rumours of a clash with Virgin’s new owner Bain Capital over the future direction of the airline.

He will be replaced by former Jetstar boss Jayne Hrdlicka in early November, when Bain takes full control of the airline from administrator Deloitte.

Mr Scurrah’s post-administration vision for Virgin Australia was to keep it operating as a full-service airline, complete with business classes and lounges, but with a more streamlined structure and heavily reduced cost base.

Bain committed to that vision in its bid to buy the airline, but trade unions now fear it will renege on its promises and take it down a budget route instead.

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Virgin Australia CEO Paul Scurrah has announced he would step down from his role with the airline after 20 months. Picture: Lyndon MechielsenSource:News Corp Australia

Jayne Hrdlicka will be the airline’s new CEO. Picture: Hollie Adams/The AustralianSource:News Corp Australia

Sources say that was behind the leadership change.

“We think they’re going down a budget path, and Paul doesn’t have budget carrier experience,” a senior management source told Nine newspapers.

Ms Hrdlicka, meanwhile, does — the Tennis Australia president and former A2 Milk boss was group chief executive officer at Jetstar between 2012 and 2018.

In a statement, Deloitte administrator Vaughan Strawbridge said he believed Bain would not turn Australia’s second airline into a low-cost carrier.

“I know there has been speculation about the shape of the airline into the future, and I have reaffirmed with Bain Capital that Virgin Australia will not be repositioned as a low-cost carrier,” Mr Strawbridge said.

“Virgin Australia will be a ‘hybrid’ airline, offering great value to customers by delivering a distinctive Virgin experience at competitive prices.

There has been concern Bain will turn Virgin Australia into a low-cost carrier. Picture: NCA NewsWire / Christian GillesSource:News Corp Australia

“This will appeal to the full spectrum of travellers, from premium corporate through to more budget-focused customers.”

A well-placed source has told Deloitte is privately furious about the turn of events from Bain and the way Mr Scurrah’s resignation has played out.

Unions are concerned about what the leadership change means for the future of the airline and whether jobs will be kept if it goes low-cost.

They are now seeking an answer from Bain about whether it would honour the commitments outlined in its bid to buy the airline, which won the support of Virgin’s creditors last month.

“The assurance given to 6000 Virgin employees that their jobs would be safe was based on commitments made by Bain during the sale process to remain a full-service airline,” Australian Services Union Assistant National Secretary Emeline Gaske said.

The airline went into voluntary administration in April. Picture: NCA Newswire / Gaye GerardSource:News Corp Australia

“If Bain starts to unwind these commitments and move towards a model of a low-cost carrier, this raises very significant concerns about job security for Virgin workers.

“We call on Bain Capital to honour their commitments to Virgin employees for a full service airline and to continue negotiations with unions in good faith.”

Earlier, the Transport Workers Union (TWU) suspended enterprise bargaining talks with Virgin Australia following days of rumours about Mr Scurrah’s future with the company.

It said the announcement of Mr Scurrah’s departure left many questions unanswered.

“The statement (about Mr Scurrah’s resignation) makes no mention of previous commitments to regional routes, the international division, 6000 jobs or fleet numbers,” TWU National Secretary Michael Kaine said.

“We are seeking a meeting with Bain Capital to discuss these issues and our delegates will decide in the coming days about the future of industrial talks with the airline.

It is not clear what the in-flight experience will look like with Virgin Australia 2.0. Picture: NCA Newswire / Gaye GerardSource:News Corp Australia

“We sincerely hope that the veil of secrecy and background shenanigans on display over the past few days is not repeated. Trust must be at the heart of Bain’s dealings.”

Unions are also seeking clarification about the number of aircraft Bain planned to keep flying.

What the Virgin Australia on-board experience would look like under Bain has been open to speculation since the US-based private equity firm emerged as the airline’s new owner.

Executive Traveller reported Mr Scurrah and Bain had clashed over the US firm’s push to scale back food and drink service “to the bare minimum”.

In August, Mr Scurrah announced the airline would transition to a single Boeing 737 fleet and axe budget subsidiary Tigerair, but would keep economy and business classes and eventually bring back lounges as a “value” airline.

He made clear he did not intend for Virgin to go down the cheap, no-frills route.

“(In administration) we had the opportunity to reset some of the onerous costs we had on us, which gives us the opportunity to significantly lower that cost base without bringing the product down-market. We’re not doing that,” Mr Scurrah said at the time.

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