Qatar Airways announced that it will purchase a quarter (25%) of Virgin Australia, Australia’s top airline, from US private equity firm Bain Capital.
The move comes as the Gulf carrier attempts to gain access to Australian routes that were closed by the government a year ago.
Virgin Australia CEO Jayne Hrdlicka expressed optimism about the partnership, stating, “This deal fills a key gap in Virgin Australia’s long-term strategy. It brings a major shareholder with the scale and expertise we currently lack, enabling us to better compete domestically.”
She further emphasised in an interview with ABC television that the partnership with Qatar Airways will give Virgin Australia access to valuable resources and support.
Virgin Australia will have greater capacity to pursue an IPO and more competitiveness against rival Qantas Airways, which controls the majority of the domestic aviation market and has resisted granting greater access to the Middle Eastern carrier with the minority stake acquired for an undisclosed sum.
Australia’s domestic market is highly concentrated, with dominant player Qantas Airways carrying 62% of passengers in March 2024, according to the nation’s competition regulator. Virgin had 31% of the market, followed by Rex, which collapsed in July this year after a failed attempt to challenge the majors on capital city routes.
After rejecting Qatar Airways’ requests to fly additional services into Sydney, Melbourne, Brisbane, and Perth in 2023, the Australian government will now need to approve the deal.
“This partnership brings the missing piece to Virgin Australia’s longer-term strategy,” Virgin Australia CEO Jayne Hrdlicka said in the statement, as reported by Zawya.
According to the companies, the stake sale also acts as a foundational investment in front of Virgin Australia’s projected return to public ownership.
Virgin went bankrupt during the COVID pandemic, and was rescued in 2020 by Bain in a deal that wiped out much of the claims of unsecured creditors. Qatar’s stake serves as a cornerstone investment ahead of Virgin’s anticipated return as a listed company. Bain in 2023 postponed plans for an initial public offering that would have valued the airline at around 2.5 billion Australian dollars (USD 1.7 billion).
Last year, Bain announced that it would investigate an IPO of Virgin Australia. According to Reuters last year, Bain was aiming for a 1 billion Australian dollar listing, but the plans were shelved. Regarding the IPO plans, Bain declined to comment further.
Under the terms of the agreement with Qatar Airways, Virgin Australia intends to begin operating lease-operated flights to Doha from Brisbane, Melbourne, Perth, and Sydney by the middle of 2025, pending authorization from Australia’s competition authority.
That would allow Qatar to gain more traffic to its Doha hub, regardless of whether the Australian government approves Qatar Airways’ push for more flying rights.
Qatar has been adding to its network of global equity holdings. The carrier has announced several acquisitions in Africa, including buying a 25% stake in South Africa’s SA Airlink and the pending purchase of 49% of RwandAir. The Doha-based flagship carrier is also known as the largest shareholder of British Airways owner IAG SA, and owns about 10% of Hong Kong-based Cathay Pacific Airways and Latam Airlines Group SA.