Another red ink – laced update from Virgin Australia yesterday overshadowed a possibly more important bit of news for the company’s future – Middle East airline, Etihad has decided to fully support a capital raising, and therefore the airline’s dramatic plans to revamp itself. Virgin shares were unchanged at 21.5 cents yesterday.
For the past month or more there have been reports that Etihad was not enamoured of the way Virgin was travelling and that it would allow its shareholding to be diluted by not contributing to the current $852 million capital raising.
But a spokesperson for the airline revealed yesterday that Etihad had decided on Wednesday night to contribute to the funding round in full up to its 21.8% stake in the company.
Etihad’s board has endorsed a proposal to take up its pro-rata entitlement in the non-renounceable entitlement offer for new shares in Virgin, which closed on Wednesday night, a Etihad spokesperson said, according to media reports yesterday.
"Etihad Airways is a long-term strategic investor and commercial partner to Virgin Australia, and remains fully committed to the partnership as a shareholder," the spokesperson said.
That is far more important news to the long term plans for the airline than yesterday’s 4th quarter trading update. It means instead of having two major shareholders on the sidelines, there will now only be one – Air NZ, which has slashed its holding after disagreeing with the plans to revitalise Virgin.
Air New Zealand last month agreed to sell most of its Virgin shareholding to Chinese giant Nanshan Group in a deal worth $301 million.
The Air NZ deal came hot on the heels of China’s biggest private airline operator, HNA, buying a 13% in Virgin, with a plans to increase its holding to 19.99% time.
On June 15, Virgin announced plans to raise $852 million via a non-renounceable entitlement offer to shareholders at 21 cents a share, and a major operational revamp.
Virgin Australia told the ASX yesterday that its June 30 full year loss more than doubled from a year ago, thanks to the string of costs from the restructure, plus the intensifying domestic and international competition.
Australia’s second-biggest airline will report a $224.7 million loss on August 5 due to the cost of overhauling the airline. That compares with a $93.8 million loss in 2014-15.
Underlying profit for the 12 months to June 30 will meet guidance at $41.0 million, an improvement on 2014-15’s $49.0 million underlying loss.
Virgin plans to use the proceeds from the capital raising to pay down debt and improve its business after an extensive review of its finances.
