The owner of Virgin Australia, US private equity group Bain Capital, has been accused of misleading Australians over its plans for the airline after replacing the company’s chief executive with the former boss of a budget operator.
Virgin Australia on Thursday confirmed reports that Paul Scurrah was to leave the airline within week, to be replaced by Jayne Hrdlicka, the former CEO of Qantas’s budget brand, Jetstar.
The move sparked fears among unions that Bain would walk away from commitments to run Virgin Australia as a full-service airline, keep 6,000 jobs, maintain regional routes and reopen international travel when the coronavirus pandemic permits.
In addition to the potential job losses, a weakened Virgin Australia may not be able to compete effectively with the bigger Qantas, increasing the risk of higher airfares.
Michael Kaine, the national secretary of key Virgin Australia union the Transport Workers Union, blasted Bain and called on transport minister Michael McCormack, who he said was “perpetually missing in action”, to force the private equity group to live up to its promises.
Scurrah was “a tough CEO [but] when he gave his word, he’d stand by it”.
“What we’ve seen at Bain over the last 24 hours has all the hallmarks of slippery private equity doing backroom deals that are not in the public interest,” he said.
“I think the Australian community has been misled here.”
A Bain spokesman declined to respond to Kaine’s allegations.
Unions, including the TWU, reluctantly supported the Bain offer after the private equity firm said in August that Scurrah and his team had its support.
They supported Scurrah’s plan to cut 3,000 jobs from the airline as the best available deal in the belief that the budget option supported by some Bain executives would result in an airline that was too small and weak to operate effectively.
Union leaders also dislike Hrdlicka over her role as CEO of Jetstar, an airline where employees are paid significantly less than at parent Qantas. The TWU in particular frequently engaged in industrial stoushes with Jetstar over pay and conditions.
As a result of Scurrah’s impending departure, the TWU on Wednesday suspended negotiations with Virgin over a new enterprise agreement.
The Australian Services Union, which also represents workers at Virgin Australia, also said it was concerned that Bain might remake the airline as a budget carrier.
“Bain has an obligation to be honest with Virgin employees about their plans,” assistant national secretary Emeline Gaske said.
“Between Covid, stand-downs, redundancies and management pushing cuts to pay and conditions, they’ve been through absolute hell these last seven months. It is unacceptable that on top of this Bain is trying to cut workers conditions down to the bone.”
News of Scurrah’s exit was broken by the West Australian on Wednesday morning, but the executive gave a non-committal answer when asked whether he was leaving the company during a conference held by the Australian Financial Review.
Bain initially declined to comment, but on Thursday issued a statement confirming Scurrah would be replaced by Hrdlicka.
The managing director, Mike Murphy, said Virgin Australia “requires a different form of leadership to survive in the long term”.
“Given the environment, we need a hands-on CEO with deep aviation, commercial, operational and transformation experience.”
In fact, Scurrah’s experience in aviation stretches back to the 1990s, when he worked at Qantas. He also worked for Australia’s former second airline, Ansett, before its collapse in 2002.
Before Virgin Australia entered administration in April due to the Covid-19 crisis, he was also working to transform the airline away from the high-cost model put in place by his predecessor, John Borghetti.
However, Murphy said Hrdlicka was “the right person to take the business forward under Bain Capital’s ownership”.
“She has extensive airline experience and I know she, alongside Bain Capital, wants nothing more than to see Virgin Australia prosper and thrive well into the future,” he said.
He thanked Scurrah for providing “the leadership to enable Virgin Australia to emerge from voluntary administration as a well-capitalised, best-in-class carrier.”
“His personal commitment and determination to lead Virgin Australia through such a turbulent period is a credit to him.”
