SIA raises stake in Virgin Australia amid ownership issues

Speculation about Virgin Australia's ownership mounted last week after the airline's largest shareholder, Air New Zealand, said it is considering an exit.
Speculation about Virgin Australia's ownership mounted last week after the airline's largest shareholder, Air New Zealand, said it is considering an exit.PHOTO: REUTERS

S'pore carrier increased shareholding to 23.11%

SYDNEY • Singapore Airlines has raised its stake in Virgin Australia a week after future ownership of the A$1.3 billion (S$1.33 billion) airline was put in doubt. The Singapore carrier increased the shareholding to 23.11 per cent from 22.91 per cent, it said in a statement late on Wednesday.

The airline said it paid A$3.18 million, or 46.7 Australian cents on average for each Virgin Australia share, to settle a series of equity swaps.

Speculation about Virgin Australia's ownership mounted last week after the airline's largest shareholder, Air New Zealand, said it is considering an exit.

Several other carriers might be interested in acquiring Air New Zealand's stake, including a Chinese airline, reports said last week, without naming potential buyers.

While the latest purchase barely changes Singapore Air's stake, it is paying 32 per cent more than Virgin Australia's last closing price for the additional shares.

"If one wanted to draw a 'loose' conclusion from last night's announcement, it's that Singapore Air does not seem to have objections to injecting further cash into Virgin," Citigroup's credit trading desk in Sydney said in a note to clients.

Virgin gained 4.23 per cent to 37 Australian cents in Sydney trading.

Singapore Air has approval from Australia's Foreign Investment Review Board to increase its stake in Virgin Australia to 25.9 per cent. The Singapore carrier declined to comment beyond Wednesday's statement, it said in an e-mail.

Air New Zealand said last week it may sell some or all of its 25.89 per cent stake in Brisbane-based Virgin.

Etihad Airways owns about 24 per cent of Virgin Australia, making it the second-largest shareholder, while Virgin Group owns about 10 per cent, according to data compiled by Bloomberg.

Virgin Australia borrowed A$425 million from its major shareholders last month, giving the airline time to review its balance sheet.

After three consecutive annual losses, Virgin Australia is expected to post a profit in the 12 months ending this June, following a slump in fuel prices, according to analyst estimates compiled by Bloomberg.

Virgin America, the airline backed by British billionaire Richard Branson, is reaching out to potential buyers about a sale of part or all of the company, according to people familiar with the matter.

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A version of this article appeared in the print edition of The Straits Times on April 08, 2016, with the headline 'SIA raises stake in Virgin Australia amid ownership issues'. Print Edition | Subscribe