Bain Capital's magic Virgin ticket
As the PE firm prepares to exit the airline, $93 million of expired flight credits should come in very handy.
There are few companies in Australia that seem to have done better out of COVID-19 than Bain Capital. Without the pandemic, Bain couldn't have plucked Virgin Australia out of administration in November 2020 for a mere $3.5 billion[[Only $730 million of this headline price was equity.]] and repaid itself in full within three years. Now six years and greater than $1 billion in distributed returns later, Covid has secured another windfall for the US private equity giant, this time in the form of $93 million in expired flight credits long forgotten by unlucky punters.
The closure of the world's airspace in March 2020 meant airlines held billions of dollars in advance ticket revenue from customers who were unable to travel. In Virgin's case, more than $1 billion in COVID-19 flight credits accumulated between April 2020 and July 2022.[[Not to be confused with the $281 million Virgin owed to customers whose flights had been cancelled when in April 2020 it fell into insolvency.]] At the airline's half-year results in February, chief executive Dave Emerson revealed all but $93 million had been redeemed and that customers would have until June 30 to cash in the remaining credits or lose them.
Virgin says more than 90 per cent of the customers that have not been repaid have not interacted with the airline in more than three years and did not respond to the company's effort to contact them. Adele Eliseo, the founder of loyalty advisory platform The Champagne Mile, says the company should be made to divulge their contact methods. "Failing to offer indefinite cash refunds or travel vouchers falls short of consumer expectations. It's just hard to believe huge numbers of Australians would walk away from thousands of dollars in travel value if they knew it was there," she said.
Virgin declined to confirm whether the balance has fallen since its February update. We'll have to wait with baited breath until August 28 when the airline unveils its full-year results, but it's safe to assume it hasn’t fallen materially or Virgin would be bragging about it.
