News
Air NZ eyes Virgin Australia exit, Luxon quits board
April 1st 2016
Air New Zealand (Air NZ) on Wednesday issued a statement saying it is considering selling its 26% stake in Virgin Australia. Air NZ CEO, Christopher Luxon, resigned from the Australian carrier's board the same day. Read More »
Air NZ chairman, Tony Carter, said the Kiwi flag carrier does not want to retain a large minority shareholding in Virgin Australia as it focuses on its own growth opportunities. "Air New Zealand intends to coordinate its review of its investment in Virgin Australia with that airline’s broader capital structure review, and looks forward to continuing its strong relationship with Virgin Australia and working constructively together," the carrier said.
Etihad Airways holds a 24% stake in Virgin, Singapore Airlines (SIA) has 23%, and Virgin Group accounts for 10%, leaving the Qantas Airways rival with a free float of below 20%, making it difficult for large funds to invest as the stock is too illiquid.
“The fact that […] Luxon has been unhappy with the progress of Virgin's profit turnaround is a bit of an open secret. Reading between the lines it would seem that Luxon pushed his case with the Virgin board – and lost,” the Sydney Morning Herald suggested.
Virgin reported an A$62.5 million ($47.9 million) net profit for the six months through to December 31, its best result in six years, but then it last week had to borrow A$425 million from its four major shareholders to fix its balance sheet.
In response to the Air NZ announcement, Virgin stated its transformation program “has seen it evolve from a low-cost carrier to a diversified airline group” that has “brought genuine competition to Australian aviation [and built] a sizeable market share.”
Air NZ still wants to continue its commercial partnership with Virgin Australia, even if it withdraws its funds. “We look forward to continuing our partnership on the Tasman alliance providing customers with the most comprehensive trans-Tasman network,” Chris Luxon said.
It remains to be seen whether the trans-Tasman partnership survives, particularly given that SIA is set to launch its own Singapore-Canberra-Wellington flights, on which Virgin will codeshare.
Etihad boss, James Hogan, is in Australia this week. Perhaps he would like to bag Air NZ’s Virgin equity?
