Indian budget airline's majority holder weighs bid for Virgin Australia

SYDNEY • The biggest shareholder of Indian budget carrier IndiGo is considering a bid for Virgin Australia, joining suitors seeking to capitalise on Asia's first airline casualty from the coronavirus pandemic.

Mr Rahul Bhatia, who owns the IndiGo holding through InterGlobe Enterprises, is evaluating data of the Australian airline founded by Briton Richard Branson and is finalising a strategy, said a person with direct knowledge of the matter.

IndiGo denied an earlier report that it plans to bid for Virgin Australia. The proposal is being prepared by InterGlobe Enterprises, and not by IndiGo, the person said.

Virgin Australia's administrator, Deloitte, said 19 parties interested in purchasing the airline had been granted access to a data room as of Monday, according to an affidavit published by the Federal Court of Australia yesterday.

The airline, which is 20 per cent owned by Singapore Airlines, entered voluntary administration last month, owing A$6.8 billion (S$6.3 billion) to more than 10,000 creditors and overwhelmed by a near-halt in revenue as the coronavirus pandemic shut down travel.

Deloitte is seeking indicative bids by Friday and binding offers in June, targeting a deal by the end of that month.

Virgin Australia has 117 leased planes and engines with monthly rentals of A$40 million, of which only 50 are operational due to the low demand brought on by the pandemic, administrator Vaughan Strawbridge said in the affidavit.

The airline reported seven consecutive annual losses before it folded. According to the Australian Financial Review, the Indian proposal aims to relaunch the airline in its original form as a low-cost carrier to return it to profit.

At the time of its first flight from Brisbane to Sydney in 2000, Virgin had just two aircraft and one route. Under chief executive officer John Borghetti, who took over in 2010, the airline transformed itself into a full-service carrier, selling business-class seats across its domestic network. Mr Borghetti went head to head against his old employer, Qantas Airways.

The huge investment required for the battle, and a capacity war with Qantas, spawned almost endless losses. Mr Paul Scurrah, who took over at the helm last year, was in the middle of a turnaround plan to cut debt and costs when the coronavirus emerged and dashed any hope of a recovery.

A plan to operate Virgin as a low-cost carrier may run into opposition in Australia. Such a strategy would hand almost all the corporate and business-class market to Qantas, which itself owns budget carrier Jetstar. Australia's competition watchdog head Rod Sims has called for Virgin to return as a full-service carrier. The government also said it wants the country to have two competing airlines.

Meanwhile, Mr Branson's Virgin Group on Monday said it may sell up to 25 million shares of space tourism company Virgin Galactic to raise funds. It said it intends to use the proceeds to support its portfolio of global leisure, holiday and travel businesses that have been affected by the pandemic.

Shares of Virgin Galactic, which have gained 69 per cent this year, were down 3.1 per cent at US$19.54 in afternoon trade. Based on last Friday's closing price, the offering would raise as much as US$504.5 million (S$715 million).

The company, which aims to offer the first commercial space flight later this year, last month said it would keep running as a critical infrastructure business during the pandemic.

REUTERS, BLOOMBERG