Bain Capital, the private equity firm that purchased Virgin Australia out of voluntary administration in November 2020, is reportedly eyeing to float the company on the ASX as soon as 2023.
According to a report by The Australian, sources suggest Bain is planning to wait out the volatility of the COVID pandemic and the Omicron variant before making its initial public offering, ideally by the end of next year.
The sources said Bain could look to offload up to 50 per cent of its ownership in Virgin Australia, less than two years after its $3.5 billion purchase of the company.
Discussions have reportedly already begun in recent months with advisers about future prospects, with the possibility of a float to be further assessed in mid-2022, with a planned IPO in 2023.
According to the report, sources say prospective investors would likely have a better understanding of Virgin’s earning potential by 2023, after the airline’s domestic capacity operates under more usual conditions.
While no investment bank has been appointed at present for a transaction, US-based Goldman Sachs is expected to be involved, given its previous associations with Bain Capital.
It comes after Virgin last month surprisingly reported a $3.7 billion after-tax profit for the year ending 30 June 2021, the airline’s first in nearly a decade, after the airline clawed its way out of administration.
The result is a significant improvement on its 2019-20 financial year results that saw Virgin report a $3 billion loss. However, the profit came largely off the back of the $4.4 billion in creditors’ claims that were extinguished by its administrators, following the sale of the airline to Bain.
The figures were also bolstered by Virgin’s acceptance of $205 million in JobKeeper payments in the 2020-21 financial year, while the airline also managed to halve its labour costs by the end of 2020, after making more than 3,000 staff redundant and axing budget subsidiary Tiger.
Overall, Virgin saw an underlying before-tax loss of $76.8 million – marking perhaps a better indicator of Virgin’s financial performance in the year to 30 June.
This figure excludes over $600 million in impairment charges, redundancies, penalties, foreign exchange losses and the $110 million spent on administration costs to Deloitte.
In the year to 30 June, revenue fell by nearly 70 per cent due to intermittent border closures, from $4.5 billion in 2019-20 to just $1.5 billion, however Virgin claimed it was similarly able to cut down expenditure, also by 70 per cent.
Domestic passenger and freight revenue together fell from $2.6 billion in 2019-20 to $983.3 million in the year to 30 June, while international sales fell from $966.2 million down to just $8 million.
Meanwhile, the airline’s regional operations bolstered Virgin’s bottom line throughout the pandemic, with revenues up 23 per cent year-on-year to $215 million.
It also comes after Virgin this month was forced to slash its flight capacity for January and February by 25 per cent and place its recently resumed sole international service to Fiji on hold, as it navigates the ongoing Omicron outbreak.
According to the airline, travel demand has subdued due to the new outbreak ripping across Australia, with the country surpassing one million total cases of COVID-19 on Monday, around half of which have been recorded in the last week alone.
Meanwhile, the industry continues to face an ongoing staff shortage, with frontline workers repeatedly sent into seven-day isolation due to being deemed close contacts of confirmed COVID cases.
As a result, Virgin has slashed capacity across its network and suspended all flights on 10 of its routes, including its one international service to Fiji – less than one month after reinstating the service for the first time since the airline entered administration.