Virgin Australia has received a $336 million boost to its balance sheet after completing the partial sale of its Velocity Frequent Flyer program.
The deal to sell a 35 per cent stake in Velocity to investment firm and fund manager Affinity Equity Partners that was announced in August has been concluded, Virgin said in a statement on Wednesday.
A new Velocity Frequent Flyer board will soon be put together, with Virgin to appoint the chair and retain majority 65 per cent voting rights.
“Through access to additional capital and resources, this partnership will allow us to accelerate our strategy to become a world class loyalty business,” Velocity chief executive Neil Thompson said in a statement.
“This strategic investment by Affinity will allow us to deliver new innovation to our members, including unique rewards and benefits at a faster rate.”
Virgin hopes to grow the membership base of Velocity to seven million by 2017, from about 4.5 million currently. By comparison, Qantas said in August its frequent flyer program had a little over 10 million members.
The transaction, which valued Velocity at $960 million, comes as Virgin prepares to take full ownership of Tigerair Australia, having agreed to buy the remaining 40 per cent of the loss-making carrier that it did not already own from Singapore-based Tiger Airways Holdings for A$1.
Virgin chief executive John Borghetti said Velocity’s growth was “only just taking off” and the deal would “turbocharge its development”.
“With Affinity comes also enormous capability in data analytics and systems. That is very important,” Borghetti said on August 29.
“The strategic relationships that Affinity Partners is going to bring to the deal, we couldn’t buy that. It will give us a truly what I would call eventually a new standard of loyalty program that far exceeds our current boundaries both geographically and from a strategic point of view.”