Mon. Sep 16th, 2019

Frequent-flyer partner of Virgin Australia seeks out to exit stake

On Thursday, Virgin Australia Holdings Ltd stated that Affinity Equity Partners is on the lookout for exiting its 35 percent minority stake in the carrier’s Velocity frequent flyer program, 5 years after its A$335 million which is equivalent to $233 million purchase.

The second-largest airline of Australia stated that it had intentions of staying a majority investor in Velocity, which competes with the larger Qantas Airways Ltd frequent flyer program for Australian customers.

The latent Affinity exit is the most recent test of investor demand for loyalty programs followed by airlines Air Canada (AC.TO) and Brazil’s Gol Linhas Aéreas Inteligentes SA (GOLL4.SA), which had turned off their frequent flyer programs, last year purchased out minority shareholders to get the gain of full control.

It also came as the Virgin is re-assessing its broader strategy under the management of new Chief Executive Officer Paul Scurrah, who took over from the former CEO John Borghetti in March.

Virgin added in a statement to the stock exchange that Affinity, which is a private equity firm, had requested it explore multiple options for the stake sale. There has been no setup of time-frame or terms.

In a promising prospectus which was issued 5 years ago, Virgin stated that there was a potential for Affinity to exit through a float or trade sale within 3 years of the purchase date.

According to the prospectus, In relation to Affinity’s stake, Virgin has a first right of the offer in certain circumstances and has the right of participating in other exit mechanisms which are available to Affinity.

By the first six months of the 2019 financial year, Velocity had 9.5M members and was on track for yearly EBIT of around A$120M.

Velocity could be valued at around A$2Bn based on its earnings, The Australian Financial Review reported on Wednesday, citing analysts.