Qatar Airways is in negotiations to acquire up to a 20% stake in Virgin Australia, a move that could significantly impact the country's aviation industry.
The move would extend an existing partnership the airlines have as they look to compete against Qantas.
Two sources close to the transaction, who spoke on condition of anonymity, indicated that Virgin's advisers had also considered a stake sale to Singapore Airlines, which ultimately did not materialise.
Qatar Airways' interest in a stake in Virgin could be announced as early as next week, pending approval from the Foreign Investment Review Board, which may block the transaction.
Qatar Airways could not be reached for comment by the AFR, and Bain Capital declined to comment.
Strained relationship could hamper deal
Qatar Airways' relationship with the Albanese Government has been strained. Last year, Labor blocked Qatar's proposal to increase flights to Melbourne, Sydney, Brisbane and Perth, citing the need to protect aviation jobs and support Qantas' investment in new planes. Virgin argued that blocking additional flights protected Qantas' market share, especially on routes to Europe.
Since rejecting Qatar's bid to expand air rights, Transport Minister Catherine King has quadrupled Australia's agreement with Turkey to 35 flights per week and allowed Sri Lankan Airlines to increase its services from 14 to 42 per week. Despite these increases, neither Turkish Airlines nor Sri Lankan Airlines have sufficient aircraft to utilise their full allotment, while Qatar operates at maximum capacity.
Qatar Airways requested more flights in March but industry sources say they have not been consulted. Qatar Airways' CEO Badr Mohammed Al Meer expressed optimism about additional flights during an industry event in Dubai but did not comment on the potential Virgin stake.
Open up the airways
Stephen Pearse, executive director of the Board of Airline Representatives Australia, supported less restrictive agreements.
“We hope the government will get back into discussions with Qatar,” he said.
He added that Qatar's investment in Virgin would benefit the domestic aviation industry. “Virgin having a solid backing would be clearly helpful for the domestic industry.”
Floating away
Bain Capital acquired Virgin in 2020 amid the COVID-19 pandemic. Singapore Airlines, Etihad Airways and two Chinese carriers previously held stakes in Virgin.
Bain's plans to list Virgin on the ASX were postponed due to poor market conditions last year, leading to the appointment of Goldman Sachs (NYSE:GS), Barrenjoey and UBS to prepare for a float. After abandoning the listing plans, Virgin announced CEO Jayne Hrdlicka's departure.
Fund managers have not heard from Virgin since the float was shelved, raising concerns about the timeline for an initial public offering (IPO). Hrdlicka will leave once Bain appoints a successor.
Former Jetstar CEO Gareth Evans declined the role with former Qantas executive Paul Jones, now Virgin's chief customer officer, expected to be appointed.
Since the float delay, Virgin has faced increased scrutiny.
JPMorgan (NYSE:JPM) analyst Anthony Longo reported last month that Qantas and Jetstar gained market share this year, a claim Hrdlicka dismissed as ill-informed.
Virgin reported $2.8 billion in revenue for the six months to December 31, up from $2.5 billion the previous year, and a profit of $129 million for the year ending June 30.