Australia, insurance, car, home, live, holidays

Air New Zealand and Regional Express have rejected media speculation Virgin Australia is considering a merger aquisition.Credit:James Alcock

Virgin collapsed in 2020 when flights were grounded at the start of the COVID-19 pandemic. Bain beat out a host of private equity funds to buy the airline out of voluntary administration for $3.5 billion in November 2020. Media and market speculation is mounting that Bain could look to list Virgin on the ASX as soon as 2023,in what would be a highly anticipated sharemarket float.

Financial statementslodged with the corporate regulator this week show that Virgin’s operational loss ballooned to $386.7 million last financial year,compared with $76.8 million in 2021.

But the airline’s chief executive,Jane Hrdlicka,has said the loss reflected the carrier’s “transition out of a really tough period for the industry into a period that looks pretty bright” and is forecasting a return to profitability this financial year.

“We’re very focused on running the business and making sure we’re in great form for an eventual[sharemarket] listing,” she said this week.

“We know we’ve got to continue to take costs out[of the business] because inflation is coming at us faster than we can bail the water out,” she continued.

The Australianthis week reported that Virgin and Air New Zealand recently held merger discussions and that Virgin was also assessing a move for ASX-listed regional carrier Regional Express.

Virgin and Bain Capital declined to comment on the reports when contacted by this masthead. Regional Express said the company “does not comment on market speculation or rumour”. All listed companies are required to disclose market sensitive information to the securities exchange.

The aviation sector has been rocked by a string of operational issues this year including staff shortages,the soaring cost of jet fuel and widespread cancellations which have threatened the industry’s razor-thin margins. But Qantas chief executiveAlan Joyce recently said demand had never been higher,with travellers flocking back to the skies after a prolonged period of lockdowns and border closures.

Air New Zealand sold its 19.99 per cent stake in Virgin to the Chinese conglomerate Nanshan Group for $260 million in 2016. The New Zealand government owns more than half of Air New Zealand,and has a codeshare agreement with Qantas for certain trans-Tasman flights.

Virgin’s financial results showed Bain has an ongoing agreement to provide the airline with “management and other consulting services”,which cost the carrier several million dollars each month in addition to the private equity group’s fixed annual fee. In the event the airline does return to the securities exchange,Bain will receive a substantial “termination fee” as per the acquisition agreement.

The Business Briefing newsletter delivers major stories,exclusive coverage and expert opinion.Sign up to get it every weekday morning.

License this article