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Analysts sense privatisation looming for Virgin Australia

October 17, 2013 Aviation, Headline News 1 Comment Email Email

egtmedia59The decision by Etihad Airways to increase its equity stake in Virgin Australia Holdings to almost 20% has triggered speculation that Virgin Australia is on the way to being privatised.

Macquarie analysts say the likelihood is growing that two of Virgin Australia’s three largest shareholders will eventually move to privatise the airline, Melbourne’s Age newspaper reported.

Etihad, national airline of the United Arab Emirates, confirmed recently that its equity stake in Virgin Australia Holdings had reached 19.9%. That percentage is the threshold approved by Australia’s Foreign Investment Review Board in June 2013. Cordato Partners-www.tourismlegal.com.au

Air New Zealand, Virgin Australia’s largest shareholder, has regulatory clearance to boost its stake from 23% to 26%. Singapore Airlines has a 19% stake, and

Macquarie analysts say Air New Zealand and Singapore Airlines appear most likely to pair up to acquire Virgin in the medium term.

Etihad has made a series of on-market purchases of Virgin Australia shares over recent weeks. The Abu Dhabi-based airline now holds more than 515 million shares in its equity partner airline.

James Hogan, President and Chief Executive Officer of Etihad Airways, said: “We are delighted to have reached this milestone. It reflects our strong support for the business strategy and management team of Virgin Australia and our enduring commitment to the Australian market. It also reflects the close working relationship between our two airlines and we look forward to strengthening its commercial foundations.”

Etihad Airways and Virgin Australia signed a 10-year strategic partnership agreement in August 2010 that includes code sharing on flights, joint sales and marketing activities, and reciprocal earn-and-burn on their respective frequent flyer programs.

Etihad Airways also holds equity investments in airberlin, Air Seychelles, Virgin Australia and Aer Lingus, will acquire 49% of Air Serbia from January 2014, and, subject to regulatory approval, will acquire 24% of India’s Jet Airways. It also has codeshare partnerships with 47 airlines worldwide.

The Macquarie analysts stressed that while Singapore Airlines and Air New Zealand were the “most likely combination due to overlapping strategic interests”, they would first need to form a tighter alliance, the Age reported.

Finally, Richard Branson’s Virgin Group is not entirely out of the picture. The English entrepreneur sold some of is holding in Virgin Australia recently (Etihad snapped up some of it) but Branson still holds a 10% stake. That could prove pivotal in any privatisation deal.

Written by : Peter Needham

Currently there is "1 comment" on this Article:

  1. Mark Cameron says:

    they can have it – As with other airline shares it is a dog ! They have gone through hundreds of millions of dollars over the years for no result……..

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