Qatar Airways and Virgin Australia

[lloyd fox]

AFR 01Sep 2024

Qatar Airways approaches the landing strip on Virgin Australia stake
Sarah Thompson, Kanika Sood and Emma Rapaport
Updated Sep 2, 2024 – 7.40am, first published at 5.00am

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Qatar Airways is close to finalising a deal to acquire a minority stake in Virgin Australia, almost 1½ years after its private equity owner Bain Capital delayed a billion-dollar float of the carrier and pivoted to courting strategic buyers.

Street Talk understands Qatar is within days of signing the deal, although it would be conditional on receiving approval from the Foreign Investment Review Board. The talks were first revealed by The Australian Financial Review in June.

Virgin Australia is set to add Qatar Airways to its share register.

And while Labor has had some troubles with Qatar in the past – knocking back the state-owned airline’s requests for more flights into the country – it would presumably have some second thoughts about kiboshing this deal unless FIRB had solid ground to recommend against it.

Remember, Bonza and Regional Express have both collapsed in recent months, leaving few competitors for local giant Qantas. Knocking back Qatar saw the government criticised for protecting Qantas’ profits. And an election is near.

Should the two camps sign a deal as expected, it could dramatically shake up Australia’s aviation landscape – and possibly threaten Qantas’ stranglehold on domestic routes.
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Qantas and its budget carrier Jetstar had 61.8 per cent market share of domestic passengers at the end of March, ahead of Virgin’s 31.3 per cent, which could expand with Qatar as a strategic backer. For international travel, Qatar would be acquiring the Virgin stake at a time when fellow overseas carriers like Emirates and Singapore Airlines are continuing to add capacity for flights as demand bounces back from the COVID-19 lull.

As for Bain Capital, which bought Virgin out of administration in 2020 at the start of the pandemic, the Qatar deal is expected to ring in a payday while still leaving its dealmakers with majority ownership of the carrier.

The US private capital bigwig, led locally by Michael Murphy, had Goldman Sachs, Barrenjoey and UBS and power through a non-deal roadshow early last year but did not pull the trigger on the mooted float. Senior managers – chief executive Jayne Hrdlicka and chief development officer David Marr – who presented at the IPO meetings, have exited or are exiting the business.

Virgin recorded $2.8 billion in revenue in the six months to December 31, up from $2.5 billion in the same period the previous year. It reported a $129 million profit in the 2023 financial year, according to accounts filed with the corporate regulator.