Bain Capital prepares to relist Virgin Australia as aviation market recovers

Bain Capital is preparing to list Virgin Australia, the country’s second-largest carrier, more than two years after it bought the business out of administration, as a rebound in travel buoys the aviation sector.

Virgin Australia was one of the most high-profile corporate collapses triggered by the pandemic when it entered administration in April 2020 after the Australian government and shareholders declined to bail out the carrier.

The global airline industry was hit hard by the pandemic as planes were grounded. Dozens of small, struggling and regional airlines collapsed after the onset of Covid-19 had a debilitating impact on cross-border travel.

In Australia, the closure of internal state borders along with the decision to close the country to international travellers effectively shut down the tourism sector. Qantas, the country’s flag carrier, admitted last year it was weeks away from bankruptcy at the height of the pandemic.

Yet the full reopening of the country last year has triggered a strong rebound in both domestic and international travel. Shares in Qantas, which has reduced debt and increased profit in recent quarters, have almost returned to pre-pandemic levels. A budget airline called Bonza is set to launch to capture a share of the strong domestic demand for flights.

Virgin Australia has a market share of more than 30 per cent, up from the 20 per cent it commanded when it collapsed three years ago, according to Capa, an aviation advisory company.

The airline recorded an operating loss of almost A$400mn ($279mn) in the year to June 2022, but management has indicated that it expects to return to profit this year despite a sharp rise in fuel costs and inflation more broadly.

Under Bain, it exited the international market barring two routes to holiday destinations — Nadi in Fiji and Bali in Indonesia — which has helped improve its financial performance.

Bain said it would appoint advisers with an ambition to relist its airline on the ASX “when the timing is right”.

Mike Murphy, a partner at Bain, said: “In the coming months we will consider how best to position Virgin Australia for continued growth and long-term prosperity.”

Bain intends to keep a significant stake in the business if it proceeds with the float. “The business is in great shape,” said Murphy.

Sir Richard Branson, who has a two-decade history of investment in Australian aviation, holds a 5 per cent stake in Virgin Australia.

Queensland Investment Corporation, the state of Queensland’s investment fund, has a holding of less than 3 per cent.

A float of Virgin Australia would return a well-known business to the ASX following a frantic period of dealmaking which has seen a number of Australian companies sold and delisted.