Virgin Australia Majority Owners, Bain Capital, Postpone IPO Until 2024

Bain Capital, the majority owners of Virgin Australia, have decided to delay the much-anticipated initial public offering (IPO) until at least the first half of 2024. The decision follows Virgin Australia’s announcement of its first annual profit in 11 years, recording a net profit of AUD129 million for the fiscal year ending June 30, 2023.

Speculation about an IPO had surfaced approximately a year ago, initially slated for the latter part of the first half of 2022. The timeline was subsequently pushed back to the latter part of 2022, with Bain Capital, holding a 93% share in the airline, refraining from committing to a fixed date. Virgin Australia CEO Jayne Hrdlicka, in June 2023, emphasized the lack of urgency in relisting, urging employees to focus on running the airline and leaving IPO decisions to Bain.

Bain Capital acquired Virgin Australia for AUD3.5 billion, including a cash contribution of AUD731 million, after the airline entered voluntary administration in April 2020. Despite the recent profit announcement, the delay in the IPO is attributed to various factors. Australian institutional investors express interest but seek a substantial discount compared to Qantas shares, which have experienced a 25% decline since June. Concerns also revolve around foreign carriers, like Qatar Airways, acquiring significant stakes and pursuing strategic interests.

The decision to postpone the IPO may be influenced by the modest growth in the full-year profit, only marginally exceeding the half-yearly net profit recorded in December 2022. While Hrdlicka views the results as a significant milestone, potential investors are cautious, considering the uncertain trajectory of the post-Covid travel boom for local airlines.

Virgin Australia, in its ongoing transformation, has rebuilt its fleet to 91 aircraft, mainly consisting of B737-800s. The airline added two B737-8s this year, with plans for an eleven-strong fleet by June 30, 2024. Additionally, the first of twenty-five B737-10s is expected in FY2025. Despite challenges, Virgin Australia remains committed to its long-term transformation journey, focusing on cost efficiency, a conservative balance sheet, technology investments, and workforce development.