Two Parties Interested In Virgin Australia Acquisition

Australia’s second-largest airline has the interest of two private groups as the airline looks for large investors to keep the airline running. The airline has been seriously impacted by the COVID-19 pandemic as travel bans have restricted the ability of travelers to book flights in and out of Australia. Thursday saw the airline suspend the trading of its shares as talks of financial aid and restructuring continue in the background.

Virgin Australia is Australia’s second-largest airline. Photo: Getty Images

According to Reuters, an unnamed private equity investor has partnered with “a strategic airline investor” to make an offer for the struggling airline. Furthermore, a second potential buyer is rumored to be an investment bank allied with an Australian infrastructure investor.

Private equity firm BGH Capital is rumored to be one such party rumored to be eyeing the airline.

In crisis mode

At a union-organized forum today, Virgin Australia’s Chief Operations Officer shared his bleak perspective:

“We are really in crisis mode…We are an airline and a business under significant scrutiny almost on an hourly basis.” -Stuart Aggs, Chief operations officer, Virgin Australia

Aggs, however, said that he was unable to comment on the progress of rescue talks, citing reasons of confidentiality. The airline has a limited number of options available to it.

Virgin Australia getty images
Virgin Australia was struggling financially even before the pandemic. Photo: Getty Images

The airline is currently in talks with creditors regarding debt restructuring options. This may include a debt-for-equity exchange. Advisors from a number of firms are involved, including those from UBS, Morgan Stanley, Houlihan Lokey, and Deloitte.

No government bailout

Virgin Australia was unsuccessful in getting a bailout from the Australian government. The airline was hoping for A$1.4 billion (US$889.7 million) in loans that could be converted to equity pending certain circumstances.

Thus, the only options for the airline are now private equity or liquidation. Despite a lack of government funding, the Prime Minister of Australia (and likely many Australians) wish to have more than one major airline serving the country:

“We want to have two airlines in Australia that are commercially viable…I understand and know that there are all sorts of commercial discussions going on right now. And the worst thing I could do as a prime minister or as a government is get in the way of that.” -Prime Minister Scott Morrison via Radio 3AW

Virgin-Australia-Trading-Halt
The vast majority of Virgin Australia’s services are suspended and aircraft parked. Photo: Brisbane Airport Corporation.

Conclusion

It would seem to be in the best interest of Australians to ensure that there are two major airlines serving the country. We’ve seen time and time again that competition is a huge factor in keeping prices low for travelers as airlines fight for passengers.

The fact that two parties are rumored to be eyeing investment indicates that there is still hope for the airline to remain intact. Indeed, while it may take some time for the global aviation market to recover, it is only a matter of time before aircraft take to the skies with respectable load factors.

Do you think Virgin Australia will find the private investment it needs to keep going? Let us know your thoughts in the comments.

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