Qatar Airways intends to buy a 25% stake in Virgin Australia from the American private investment company Bain Capital, which will make it difficult to compete with Qantas Airways, which has dominated Australian flight routes and has refused to grant the Gulf airline the right to expand in Australia.
The deal to purchase the minority stake – the value of which has not yet been disclosed – requires the approval of the Australian government, which last year rejected requests from Qatar Airways to operate additional flights to Sydney, Melbourne, Brisbane and Perth.
“This partnership provides the missing piece in Virgin Australia’s longer-term strategy,” Virgin Australia CEO Jane Hrdlicka said in a statement.
Hrdlicka added later in a television interview on Tuesday, “This means that we have an important shareholder who has a size that we do not have, and who has experience that we do not have, which can help us compete better locally by giving us the ability to reach this size.”
Qantas shares fell by about 4.3% in trading on Tuesday, and were among the worst performing stocks on the standard Standard & Poor’s ASX 200 index.
The companies (parties to the deal) said that the sale of the stake constitutes an essential investment ahead of the expected public offering of Virgin Australia.
Bain said last year that it would consider an initial public offering for Virgin Australia, which it bought for 3.5 billion Australian dollars ($2.42 billion), including liabilities, after it was placed under voluntary administration in 2020.
Bain was targeting a stock market listing worth one billion Australian dollars, but plans were delayed, Reuters reported last year.
Government approval
Under the deal with Qatar Airways, Virgin Australia plans to launch flights from Brisbane, Melbourne, Perth and Sydney to Doha using charter aircraft by mid-2025, which requires approval from Australia’s competition regulator.
This will allow Qatar to increase air traffic to Doha, regardless of the Australian government’s approval of Qatar Airways’ efforts to obtain more flying rights.
The Australian government’s refusal last year raised questions about the Australian government’s relationship with Qantas, which had lobbied against giving Qatar Airways more opportunities. Qantas has a partnership with Dubai-based Emirates Airlines, which is a competitor to Qatar Airways.
Qatar Airways CEO Badr Mohammed Al Meer said – in a joint statement today, Tuesday – that the company believes that competition in the field of aviation “is a good thing and helps raise the level, which ultimately benefits customers.”
The sale of Virgin Australia’s stake to Qatar Airways requires approval from Australia’s Foreign Investment Review Board, but the Australian Treasurer then has the power to accept or reject the recommendation and impose conditions on the deal.
“It would not be appropriate for me to pre-empt this process or comment further,” Australian Treasurer Jim Chalmers told reporters after the deal was announced.
“We want to see a strong and safe aviation sector that provides services to consumers,” he added.
Qatar Airways also owns minority stakes in the International Airlines Group (AIG), which owns British Airways, in Cathay Pacific Airways in Hong Kong, and in China Southern Airlines (China Southern Airlines).
