Virgin Australia, Australia’s second largest airline, is set to buy back a 35 percent share of its Velocity Frequent Flyer program from Affinity Equity Partners. The Asian equity firm announced earlier this summer that it was looking to sell off its stake in the program, weighing up a possible IPO among other things.
“The Group confirms that it has entered into a term sheet with Affinity to buy back its 35 per cent minority investment for $700 million,” Virgin Australia said in a statement. “Completion of this transaction is subject to certain conditions, including the finalisation and execution of long form documentation, funding and the Group receiving Foreign Investment Review Board approval in respect of the acquisition.”
Virgin sold the 35 percent stake to Affinity Equity Partners in 2014 for $335 million.
Times have been tough for Virgin Australia lately, with the airline registering a loss of $71.2 million in FY19. Earlier in September, the company’s shares dropped to $0.15—the lowest in 10 years.
Virgin hopes to cancel out that loss by cutting 750 jobs. Last month the company stated:
“The group is responding to these challenges with a series of immediate improvement initiatives to streamline operations and reduce costs. These include a simplified organisational structure, organisational rightsizing program, fleet and network capacity review and a group-wide review of supplier contracts. These initiatives are being implemented whilst the group’s ongoing strategic review is undertaken to improve business performance.”
The Sydney Morning Herald reports that the deal between Virgin and Affinity values the business at approximately $2 billion.
Virgin Australia began operations in 2000 under the name Virgin Blue. Today it has the largest fleet of any Virgin airline.