Etihad Airways stake in Virgin Australia rises to 21.24 per cent
Etihad Airways has increased its holdings in Virgin Australia, with the deal boosting its stake in the carrier above 20 per cent, according to a bourse statement.
In a filing to the Australian Securities Exchange (ASX), Virgin Australia stated that the voting power of Etihad has increased to 21.24 per cent from 19.9 per cent.
Etihad has been waiting for regulatory approval to increase the holding after an offer of new shares last year was not fully subscribed by retail investors.
Virgin Australia is owned by Etihad, Air New Zealand and Singapore Airlines and all three shareholders are expected to have board representation from July. In March, Singapore Airlines raised its stake in Virgin to 22.1 per cent from 19.8 per cent. Air New Zealand owns about 24 per cent.
Etihad and Virgin Australia fly 28 times a week from Australia to Abu Dhabi, which will increase to 35 flights in July when Etihad launches a daily Perth service.
The flights connect to more than 15 codeshare destinations in Europe plus destinations in the Middle East and Africa.
Analysts say that the stake increase would give Virgin an added “financial impetus” to compete domestically and internationally against its local rival Qantas – which has a tie-up with Emirates Airline.
“Etihad has made small, piecemeal buys of Virgin before so this fits in with their strategy. They aren’t looking to take them over or anything like that,” said Saj Ahmad, the chief analyst at Strategic-Aero Research.
“What it does do though is give Etihad more influence to drive Virgin’s competitive position versus Qantas without the need for direct ownership”.
Qantas had its first major job losses in 40 years last week. In February it said it would cut about 5,000 jobs, as it seeks to cut costs. Qantas reported a loss of A$235 million (Dh807.4m) for the second half of last year.
The Virgin Australia announcement is the second time that Etihad has increased its stake in one of its equity alliance partners this year. In March, it increased its stake in Ireland’s Aer Lingus to 4.1 per cent.
Etihad’s growth strategy has relied heavily on expanding its route network through equity alliances in which it invests in carriers in strategically important regions. Last year, Etihad grew its equity alliance to seven carriers – Aer Lingus, airberlin, Air Serbia, Air Seychelles, Virgin Australia, India’s Jet Airways and Switzerland’s Etihad Regional, which was formerly known as Darwin Airline.
Etihad credits this strategy for the company’s 48 per cent increase in profits last year to US$62m. Sales grew 27 per cent to $6.1 billion. Partnership revenues rose 30 per cent to $820m, representing 21 per cent of passenger revenues.
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Updated: May 19, 2014 04:00 AM