Virgin Australia returns to sharemarket with a bang
In the biggest IPO of the year, the Bain Capital-owned airline has decided to return to the ASX amid a rise in domestic tourism and spending.
The offer will almost halve Bain's stake in the airline from about 70 per cent to 39.4 per cent.
Qatar Airlines, which recently invested in Virgin, will reportedly keep its 23 per cent holding.
If successful, Virgin's listing in the market will be seen as a sign of a bright future for the Australian economy, as investors signpost the potential for the nation's consumer spending to recover.
If it fails, it could point to the opposite.
So far, all signs point to a successful IPO, as domestic travel demand recovers and the two recent RBA rate cuts ease the pressure on Australian households.
Qantas has been trading at a record high, and the ASX itself has been overwhelmingly up despite swings.
5.1 million passengers were on domestic commercial flights in Australia as of March, a figure sightly below the same time last year but more than four times the numbers in mid-2021.
Despite Virgin's voluntary administration in 2020 following Covid-19 travel restrictions, after which it was acquired by US private equity company Bain, it now corners 34.4 per cent of the domestic market share as of March 2025.
It is not lagging much behind Qantas, which holds 37.5 per cent, according to the Australian Competition and Consumer Commission.
The death of other budget airlines such as Bonza and Rex has only boosted these two major players.
Virgin is also planning to resume long-haul international flights made possible by its partnership with Qatar.
The airline is conducting its IPO using a front-end book-building method, where investor bids are submitted before the prospectus receives approval from Australian regulators.
According to the term sheet, institutional investors were able to their bids up to Thursday, with the stock expected to begin trading on June 24.
Virgin's IPO will be the largest in Australia following the DigiCo Infrastructure REIT launch that raised $2bn in December before a 30 per cent downturn in share price.
Experts say the Virgin IPO could offer investors a unique entrance into the Australian airline market, but it has its own risks.
'Virgin Australia's planned return to the ASX via a $A685m initial public offering is the first major IPO of 2025, and one to watch closely,' eToro market analyst Josh Gilbert said.
'The IPO, priced at $A2.90 per share, gives the airline a market cap of $A2.bn. It follows the on-and-off IPO over the last two years when the airline sector has moved from strength to strength, with companies around the world announcing record profits and seeing shares rally.
'Under Bain's direction, Virgin Australia has streamlined operations, focusing on profitable domestic routes, and achieved record underlying earnings of $A439m in the latest half year.
'Essentially, it's a very different airline than it was in 2020 and it is far more attractive to investors. Having only one real competitor in the landscape, Qantas, makes the offer uniquely appealing.'
However, the investment could also be a major risk.
'Investors may view Virgin's IPO as an opportunity to gain exposure to Australia's duopoly airline market at a compelling valuation that will trade at a discount to Qantas,' Mr Gilbert said.
'Although the airline sector has had a great few years, investors should be mindful of its razor-thin margins and cyclical risks, particularly if demand slows amid slowing consumer spending.'
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