QIC explores Virgin Australia bid

The airline entered voluntary administration last month after travel restrictions imposed in connection with the coronavirus outbreak wiped out demand. The Queensland government earlier offered to contribute A$200 million ($129 million) to a support package conditional on federal government backing. However, Canberra refused to provide the A$1.4 billion loan requested by Virgin.

The airline remains in operation, running domestic services and some international flights supported by the federal government. Morgan Stanley and Houlihan Lokey have been appointed to run a sale process, according to a statement by the administrators. The Australian Financial Review has identified numerous prospective bidders, including Platinum Equity, Oaktree Capital Management, Brookfield Asset Management, Indigo Partners, Bain Capital, and BGH Capital.

Cameron Dick, Queensland’s newly appointed treasurer, said that QIC had developed “a comprehensive strategy to ensure Queensland is best positioned for a successful bid.” He added that the state intended to bid as part of a consortium but gave no indication as to the identities of the partners. The Queensland contribution could take the form of a direct equity stake, a loan, a guarantee, or other financial incentives.

“We have an opportunity to retain not only head office and crew staff in Queensland, but also to grow jobs in the repairs, maintenance and overhaul sector and support both direct and indirect jobs in our tourism sector,” Dick said. He stressed the importance of Australia retaining two carriers and not allowing Qantas to enjoy a monopoly, according to a Guardian report tweeted by Dick.

Damien Frawley, QIC’s CEO, said the state’s potential interest in VAH would be managed separately from other assets. QIC has more than A$80 billion in assets, some of it managed for third parties.

VAH was established in 2000 and listed in 2003. As of June 2019, it had a domestic fleet of 96 aircraft serving 39 destinations and an international fleet of 22 aircraft serving 15 destinations. Low-cost carrier Tigerair Australia offered flights to 12 domestic destinations on 15 planes. Revenue for the year was A$5.8 billion, up 7.5%, while the company’s net loss narrowed by 51.7% to A$315.4 million.

VAH’s most valuable asset is its Velocity frequent flyer business, which had 9.8 million members as of June 2019. Revenue from the business was A$411 million, 10.5% from 2018, while EBITDA increased from A$117.1 million A$132.4 million. Affinity Equity Partners bought a 35% stake in Velocity in 2014 for A$336 million. This was sold back to VAH last year for A$700 million.

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• Topics
• Australasia
• Restructuring
• Restructuring
• Australia
• QIC
• Transportation