A former backer of collapsed Flybe has emerged as one of two frontrunners bidding to buy Virgin Australia out of administration.

Cyrus Capital has been shortlisted to take over the carrier alongside Bain Capital, the US buyout fund founded by former Republican US presidential candidate Mitt Romney.

Virgin Australia collapsed in April with debts of at least A$5 billion following the impact of Covid-19 on global travel.

New York-based hedge fund Cyrus took a stake in Flybe in 2019 as part of the Connect Airways consortium also including Virgin Atlantic and Southend airport owner Stobart Group.

But the trio failed in their attempt to revive the UK regional carrier which failed three months ago before the onslaught of coronavirus.

Cyrus also co-founded US domestic carrier Virgin America that operated for more than a decade until 2018.

The final two bidders for Virgin Australia are due to lodge binding offers on June 12, with the aim of the administrators having an agreement in place by June 30.

Creditors, including employees, bondholders, aircraft lessors and airports, are set to vote on any proposed deal in mid-August.

Private equity fund Bain Capital, which bought a stake in Webjet in April, has been aggressively public about its plans for the airline in past weeks in a bid to win over the Australian airline’s 9,000 employees, the largest creditor group by number.

The administrator, Deloitte, flagged the possibility that Bain or Cyrus may partner with some of the sidelined bidders, or others including Sir Richard Branson’s Virgin Group, state governments and other investors.

Deloitte administrator Vaughan Strawbridge said after spending four days assessing five offers for the failed airline: “There will also be speculation that entities associated with the parties that have not moved into this next phase, as well as others, could become involved in some capacity with the remaining parties. That will, of course, be a matter for them.

“Both Bain Capital and Cyrus Capital Partners are well funded, have deep aviation experience, and they see real value in the business and its future.”

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