What do the following 10 institutional members of the 32-strong Virgin Australia creditor’s committee have in common?
- Association of Virgin Australia Group Pilots (VIPA)
- Australian Council of Trade Unions (ACTU)
- Australian Federation of Air Pilots (AFAP)
- Australian Licensed Aircraft Engineers (ALAEA)
- Australian Manufacturing Workers Union (AMWU)
- Australian Services Union (ASU)
- Electrical Trades Union (ETU)
- Flight Attendants Association of Australia (FAAA)
- Skywest Airlines Pilots Association (SALPA)
- Transport Workers Unions of Australia (TWU)
They are all registered trade unions or other types of employee representatives.
And how did they get such a big presence on the Virgin creditors committee?
By promising not to move against accounting giant Deloitte as the administrator, in much the same way that then-ACTU secretary Greg Combet orchestrated the ousting of PwC as the early administrators of Ansett, to be replaced by the union-friendly alternative from the newly formed KordaMentha.
There were 69 applications to join the creditors committee and as one of 37 rejected nominees, it was pretty clear yesterday that a pre-meeting deal had been done with the unions.
Deloitte administrator Vaughan Strawbridge flashed up the proposed 32 members and then declared they had a mandate. How so? Because 5282 creditors had already indicated to him that they were comfortable with the composition of the committee.
That would be all the Virgin staff, their unions and professional associations banding together to do a pre-meeting deal to dominate the committee even though the $451 million in staff entitlements have been virtually guaranteed because Virgin will be sold as a going concern.
Creditors are owed almost $7 billion in total but as Strawbridge pointed out when answering one of the many staff questions during yesterday’s creditor meeting (my four questions were all ignored), if something goes wrong for the staff there is always the government scheme to pick up unpaid entitlements, thanks to good old Stan Howard and National Textiles.
Administrator selection matters because they have great power in the ongoing management and sale of the business, answerable to the creditors, via the creditor’s committee, which is like the new board of directors.
Administrators have to make a comprehensive conflict of interest declaration before taking on a gig like this but how do you manage the conflict when the union movement and staff representatives effectively say: ‘Please give us the biggest block of votes on the creditors committee, commit to repay 100% of staff entitlements and promise no redundancies during the course of the administration’.
Well, with many millions of fees up for grabs, you play ball, don’t you?
I registered as a creditor on Sunday citing two different entitlements: unused Velocity points and a credit bank for cancelled flights.
After emailing Deloitte, they sent through the application form to join the creditors committee and that was duly lodged on Sunday as well, along with a pitch about being an independent member to keep the bastards honest.
After that, there was nothing from Deloitte until I emailed them again at 5.46pm on Wednesday afternoon asking for log-in details for yesterday’s 65 minute Microsoft Teams creditors meeting, which had more than 1000 creditors and observers on the call.
A prompt reply set out the process to join the meeting, which the press were banned from, but there were no words on the creditor committee application, let alone confirmation that it had been rejected in a pre-meeting deal with the unions.
After reading a press report in The AFR last week saying that yesterday’s meeting would be all about nominating for the committee and there would be another meeting next Tuesday to vote on the appointments, I did an approving tweet on the good governance process being used.
In any election, there should be a clear time frame for nominations and then a separate process for voting later, allowing enough time for canvassing and distribution of relevant materials on candidates.
Unions, more than any other institutions, should know and respect this.
Were the bond holders (owed almost $2 billon) or the 10 million Velocity members consulted about having 10 union and employee groups serving on the 32-strong committee? Nope.
The next biggest category is airports which have five spots. There are no Australian banks present, and the federal government has been granted observer rights, presumably for its emissary — former Macquarie Group CEO Nicholas Moore.
After the shareholders, it will be the unsecured bondholders — both in Australia and the US — who take the biggest dollar haircut from the Virgin collapse and they will be pivotal when it comes to voting on any proposed sale.
Whoever offers them the highest cents in the dollar return should win the day and that’s who Deloitte should recommend to the creditors committee.
Some of the bondholders are said to be furious about having their requests to serve on the creditors committee rejected without explanation.
So why not proceed with the original plan of having a formal vote next Tuesday?
With online meetings it doesn’t matter how many appointments are made and it would also be handy if the institutions and corporate entities doing the nominating actually named the specific people who will be representing them.
As things stand, the committee includes groups such as Northern Trust Asset Management and Airframe Leasing Pte Ltd. But who are they and exactly how much do they claim to be owed?