Air NZ looking to sell Virgin Australia stake

written by australianaviation.com.au | March 30, 2016
Air NZ and Virgin Australia's alliance on trans-Tasman services has been approved by the ACCC until 2018. (Seth Jaworski)
Air NZ and Virgin Australia’s alliance on trans-Tasman services has been approved by the ACCC until 2018. (Seth Jaworski)

Air New Zealand is looking to sell all, or part, of its 26 per cent shareholding in Virgin Australia to focus on its own growth opportunities.

The airline said in a statement to the Australian Securities Exchange (ASX) and New Zealand stock exchange (NZX) on Wednesday – Air NZ is dual-listed – it was “exploring options with respect to its shareholding” in Virgin.

Options included a possible sale of all, or part, of its shares in Virgin. Air NZ said First NZ Capital and Credit Suisse were advising the company in this matter.

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Air NZ chairman Tony Carter says his airline’s review of its financial investment in Virgin would look at “possible alternate uses of capital currently deployed in Virgin Australia”.

Further, Carter says Air NZ “does not want a large minority equity position in Virgin Australia as it focuses on its own growth opportunities”.

Air NZ’s move comes a week after it and Virgin’s three other major shareholders agreed to provide Virgin a $A425 million 12-month loan to boost its balance sheet while the airline group conducted a capital review.

Each of the four major shareholders’ contribution to the loan, which Virgin said at the time was based on “arm’s length commercial terms”, was in proportion to their relevant interest in Virgin. Air NZ’s contribution totalled $A131.2 million.

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“Air New Zealand intends to coordinate its review of its investment in Virgin Australia with that airline’s broader capital structure review, and looks forward to continuing its strong relationship with Virgin Australia and working constructively together,” the company said.

Air NZ chief executive Christopher Luxon has immediately resigned from the Virgin board.

Luxon said he looked forward to continuing Air NZ’s alliance with Virgin on trans-Tasman services, adding that Air NZ was supportive of the “significant transformation” that has taken place at the Australian carrier under chief executive John Borghetti over the past five years.

“We look forward to continuing our partnership on the Tasman alliance, providing customers of both airlines with the most comprehensive trans-Tasman network,” Luxon said in the statement.

Earlier on Wednesday, Virgin requested its shares be placed in a trading halt ahead of the Air NZ announcement.

Virgin shares were at 38 cents at the time the stock was placed in a trading halt.

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15 Comments

  • k lane

    says:

    Again, smart move by Air NZ – Agile & nimble
    I suspect if they are reviewing their stake the medium term outlook for Virgin is average from a P&L perspective

  • Mick

    says:

    Very bad news. Staff are very worried. Company have not yet released any communications to staff.

  • JamesK

    says:

    At least kiwi’s won’t get blamed for Ansett V2.0 going under…. If they can find a buyer for the shares.

  • Paul

    says:

    Too many different Aircraft types, they should have stopped the International bleeding and ceased 777 flying, once they had the agreements in place with Delta and Etihad, and concentrated on domestic/NZ flying.
    .

  • Mal

    says:

    Air NZ can use the capital for its own purposes which in turn means we can draw the conclusion that Virgin isn’t likely to perform as well as Air NZ. It is lkely that Air NZ has grown impatient waiting for Virgin to deliver the required numbers. The marketing arrangements can remain in place without the investment. Pointless leaving capital in an under performing asset. Smart and exciting move by Air NZ. It will interesting to see what they do next. More aircraft to fly AKL – NYC or O’Hare perhaps? Or something even more interesting?

  • Mason

    says:

    Understandable, I hope Borghetti isn’t at risk of departure, I’d hate to see a low cost airline leader take over the leadership. Pretty hard to communicate any message with staff which you don’t want immediately published.

  • Mick

    says:

    At this point mason, the company is cash poor, asset poor and might not see the new year.
    At this point staff would be more than happy to see a leadership change if it means saving the airline and their jobs.

  • TheD

    says:

    AirNZ won’t offload all shares just a majority of them, at which point Etihad will make its move to buy up those shares to promote growth, it will then give the ability to fleet share with Etihad, Virgin will exist in one form or another, won’t be Ansett.2 as Ansett had major safety issues which is what grounded them, virgin has a very high safety culture.

  • R jensen

    says:

    i wonder if singapore and etihad will launch a full buyout now

  • Flyer

    says:

    As a staff member at VA – a few internal
    Structural issues with ex QF has Beene at VA acting like they are in semi retirement – bit of mid manage ment / upper management to go

  • Brendan

    says:

    I’ve seen a few comments about Ansett mark 2, are these comments admitting that Air New Zealand had something to do with the downfall of Ansett?

  • Mark

    says:

    Don’t forget Qantas where at crisis point only 2 years ago, now they are well and truly back on there feet. I suspect this will just be a hurdle for them overcome and once everything settles down, Virgin will have smooth flying ahead with steady profits.

  • Richard

    says:

    Ansett v2.0 here we go 🙁

  • GBRGB

    says:

    It needs to focus on domestic routes particularly regional routes where it is very poor, Townsville, Darwin, Tassie, Newcastle, and others, expand Tiger footprint also, let the major shareholders do all international and connect.

  • Rocket

    says:

    This is nothing like Qantas two years ago. Qantas were profitable before and after that. Virgin under the current leadership has not been profitable at any point.
    The amount of spending seems obscene for the return and the staff suffer every second half when after spending like mad in the first half everything is squeezed to the point of dis function almost in the second half.
    Question that has to be asked is if not for the $350m capital raising, partial sale of velocity and this latest $425m loan where would VA be??? I don’t see individual shareholders would have provided those funds under share issues. If it weren’t for the three major shareholders VA would not exist and it would be precisely because of the spending by current management. Who else is responsible??? The weather???

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