Virgin Australia looks set to return to the ASX for a second time with current private equity owner Bain Capital announcing on Monday that it is examining a relisting of the country’s second biggest domestic operator.
Bain Capital says it will “seek advice” on a potential public offering of the country’s second-biggest airline but has not made any decision to float.
If a decision is made to pursue a float, the shares to be shares to be issued will only be offered under a prospectus lodged with the Australian Securities and Investments Commission (ASIC).
Though the possibility of a relisting has been a market rumour for some months, Monday’s statement was the first official confirmation that such a path could be taken.
The news follows Virgin’s recent declaration it has returned to profitability two years after it nearly folded due to the COVID-19 pandemic restrictions which prevented flying in early 2020.
Financial statements lodged with ASIC last September showed Virgin’s operational loss jumped to $386.7 million in the June 30 financial year, compared with $76.8 million in 2021.
But CEO Jane Hrdlicka later announced the group had returned to making profits in November.
The airline says it has reduced its costs by $300 million since November 2020 and has grown its fleet by more than 50% since February last year as the lockdowns were lifted and interstate travel freed up.
Bain Capital partner Mike Murphy said in a statement on Monday the carrier had delivered an impressive transformation since it was bought out of administration and near-demise for $3.5 billion in 2020.
“In the coming months we will consider how best to position Virgin Australia for continued growth and long-term prosperity,” Murphy said.
“Prior to COVID-19, Virgin Australia had a proud history as a public company. While there is currently no set timetable, at some point in the future, if any IPO does happen, Bain Capital would welcome public market investors joining us as shareholders in what is a great Australian company.”
Murphy confirmed Bain would retain a significant shareholding in the event the airline relisted on the ASX.
“Bain Capital has made a long-term commitment to support Virgin Australia’s growth and sustainability,” he said.
The big question for intending investors will be how much money Bain plans to raise in the issue, how much it will leave in Virgin and how much it will take out for itself in fees and returns for investors in its private equity funds.
And the amount of debt Bain plans to leave in Virgin after the float will also be a key issue for possible investors, remembering that private equity investors always load up their investments with lots of loans and leave them with the burden after the IPO.
The last time it was listed, the Virgin became something of a corporate plaything between HNA of China, Singapore Airlines, Delta and Etihad which in turn limited its ability to survive as all those airlines had to battle to survive the pandemic in 2020 (the Chinese company, HNA collapsed). Virgin became ‘collateral’ damage.
Virgin made its return to long-haul international flying in December with a new route between Queensland and Tokyo.
If it does float, Virgin will be listing at a time when competition in Australian aviation is back to its most intense for five years with Qantas more than dominant.
But Rex, the scrappy Singapore-controlled listed regional and modest intercity airline, is still operating and profitable and newly-approved Bonza launched last week. It is based on Queensland’s Sunshine Coast and a direct state-based competitor for Virgin.
Qantas shares rose nearly 1.4% to $6.56 as investors ignored the Virgin announcement.
