Virgin Australia looks set to return to the Australian Securities Exchange in what’s likely to be the most anticipated initial public offering in recent history, with Bain Capital announcing it is considering refloating the airline.
Private equity giant Bain has announced it will seek advice on a potential future initial public offering and relisting of the country’s second-biggest airline but said it has not made any decision to float.
Bain partner Mike Murphy said in a statement on Monday the carrier had delivered an impressive transformation since it was plucked 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.
“Bain Capital will ensure these preliminary deliberations are not a distraction for Virgin Australia management, who can remain 100 per cent focused on their roles.”
Bain valued Virgin at about $1 billion when it restructured the airline at the beginning of 2021.
The move follows months of industry speculation about a potential public offering after the airline flagged it had returned to profit and gradually expanded its international routes.
Virgin’s recent declaration it’s now back in the black came two years after it nearly folded due to the COVID-19 pandemic restrictions which prevented flying.
Financial statements lodged with the corporate regulator in September show Virgin’s operational loss ballooned to $386.7 million last financial year, compared with $76.8 million in 2021. Chief executive Jayne Hrdlicka announced the group had returned to making profits in November.
The airline has reduced its costs by $300 million since November 2020 to facilitate its price restructure and has grown its fleet by more than 50 per cent since February last year.
The aviation sector was rocked by a string of operational issues last year including staff shortages, the soaring cost of jet fuel and widespread cancellations that threatened the industry’s razor-thin margins. Despite this, Qantas, Virgin and Regional Express have all indicated they’ve returned to profitability, buoyed by the continued insatiable demand for travel.
The airline game also has a new entrant – Sunshine Coast based Bonza – which has committed to offering fares between $50 and $100. The budget carrier is expected to put downward pressure on airfares across the industry after they hit highs not seen for 15 years towards the end of 2022.
Bonza will become the first domestic airline to fly the Boeing 737 Max-8 aircraft, with a fleet of three understood to be preparing to take off from its Sunshine Coast base as early as next week.
Virgin Australia has also invested heavily in the fuel-efficient Max-8s since Hrdlicka simplified its main fleet from Boeing 777s and Airbus A380s following its stint in administration in 2022.
The airline’s order of 30 Max-8s are due to commence flying this year and have a capacity of about 2000 seats, giving the airline the ability to explore less-travelled routes with high yields without the pressure to fill as many seats.
If a decision is made to pursue any IPO, securities will only be offered under a prospectus lodged with the Australian Securities and Investments Commission.
The carrier launched its return to long-haul international flying in December with a new route between Queensland and Tokyo, causing another bout of IPO rumours to swirl.
Virgin Australia and Hrdlicka declined to comment.
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Source: Thanks smh.com