State’s threat to pull $200m Virgin handout

The Queensland government's $200m investment in Virgin Australia could be pulled if it is not satisfied new owners Bain Capital can maintain a "good relationship with its workforce".

The concerns arose as a result of Bain's indication that former Jetstar chief executive Jayne Hrdlicka would be on Virgin Australia's new board, possibly as the chairman, The Australian reported

The issue is understood to have come up during weekend talks between Bain and the Queensland Investment Corporation (QIC), which is managing the government's role in the deal.

Ms Hrdlicka had a reputation for standing up to unions in her time at Jetstar, which left her out of favour with many employee groups.

A spokeswoman for Queensland Treasurer Cameron Dick said their expectation in making the investment was that Virgin "remained a full-service airline, serving a full network in Queensland and with a good relationship with its workforce".

"We expect board members to share that vision and governance to reflect it," the spokeswoman said.

Discussions over the $200m pledge, intended to keep Virgin Australia's headquarters in Brisbane, were continuing.

The threat to the investment came as the Transport Workers Union stepped up pressure on Bain to rule out a board role for Ms Hrdlicka, who had advised the firm on its bid for Virgin Australia.

TWU national secretary Michael Kaine had previously expressed his concern about Ms Hrdlicka's track record as an airline executive, including her role in the wage freeze at Jetstar following Qantas's record loss in 2014.

On Sunday, Mr Kaine said the reconstruction of Virgin was "more than a narrow commercial consideration.

"The board of the new Virgin must explicitly recognise staff are critical to this mission and emphasise co-operation rather than confrontation," Mr Kaine said.

"The board must not view its workforce as another expense like jet fuel and landing fees, but as an investment in a strong and prosperous future.

"Unfortunately the responses the TWU had received on the make-up of the new board were underwhelming.

"We are approaching a critical phase, with a vote on the deal on September 4 and negotiations on jobs," Mr Kaine said.

"Our members are committed to rebuilding Virgin, but we will not expose them to a crude rip-off where jobs and conditions are decimated."

A spokesman for Bain Capital said they would design a board and governance structure that gave Virgin the best chance of long-term success.

He expressed surprise at the comments of the TWU given the many hours spent together, discussing the significant challenges ahead for the airline.

"The key focus at the moment is getting through administration to ensure the business fights another day and has the chance to rebuild," the spokesman said.

Their plan for the airline would secure "approximately 6000 jobs once market demand recovers with potential to increase to 8000 jobs in the future", he added.

In another hurdle facing the airline, a Federal Court hearing on Monday will decide whether bondholders should be allowed to have their proposal for Virgin Australia voted on by creditors.

The proposal, which would see the $2bn owed to the bondholders converted to equity in the carrier, has been slammed by the administrators, Bain and airline management who fear it could disrupt the sale process, and even send Virgin Australia into liquidation.

Virgin Australia went into voluntary administration on April 21 with debts of $6.8bn owed to more than 10,000 creditors.