Affinity seeks exit from Virgin Australia frequent flyer business

Virgin, which holds the remaining 65% stake, said in a filing that “various exit options” would be considered for the business, known as Velocity Frequent Flyer. It comes as speculations mounts around a full or partial public float on the local stock exchange. AVCJ understands both financial and strategic investors have expressed interest in the business.

Affinity acquired its 35% position in Velocity in 2014 for A$336 million (then $314 million) in a deal that valued Velocity at A$960 million. The program was estimated to be worth more than A$1.5 billion as of May and is reportedly set to report A$120 million in earnings for financial 2019. According to The Australian Financial Review, the business could be worth up to 20x earnings.

Set up in 2005, Velocity has 9.1 million members in Australia. This compares to about 4.5 million members at the time of the Affinity investment. The business is recognized as a core asset of Virgin Australia, which is the largest airline globally by fleet size to use the Virgin brand and the second largest airline in Australia after Qantas. 

Virgin Australia reported a loss of A$653.3 million in 2018, compared to a loss of A$185.8 million the prior year. Revenue increased about 7% during this period to A$5.4 billion. Velocity earnings fell 23% to A$110 million. The company noted it was contending with industry-wide pressures around increasing fuel prices and was undertaking initiatives to access growth in Greater China and loyalty markets.

Hong Kong-based Affinity targets buyout deals in Greater China, Korea, Southeast Asia, and Australia and New Zealand. It closed its fifth pan-Asian fund last year at the hard cap of $6 billion after about five months in the market. Recent exit activity includes a plan to sell part of its stake in Malaysian poultry producer Leong Hup International in a domestic IPO.

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• Topics
• Australasia
• Exits
• Consumer
• Australia
• Affinity Equity Partners
• Transportation