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Virgin Australia shares take off as airline returns to trade on ASX
Virgin Australia shares have rallied as the airline has officially returned to the stock market, marking one of the most anticipated listings of the year and the latest chapter in its turbulent journey.
Virgin's initial public offering (IPO) was priced at $2.90 per share, raising $439 million for the company.
As the company resumed trade on the Australian Securities Exchange (ASX) on Tuesday afternoon, Virgin shares lifted more than 8 per cent to $3.15 by 12:15pm AEST.
After collapsing into administration at the height of the COVID-19 pandemic in 2020, Virgin was rescued by US private equity giant Bain Capital and delisted from the stock exchange.
Now the airline has taken off on the ASX once more, with a leaner business model, a new shareholder mix and the financial muscle of Qatar Airways behind it.
At the completion of the IPO, Bain's stake in Virgin was reduced to about 40 per cent, while Qatar Airways retained about 23 per cent, according to the prospectus.
More than five years ago now, Virgin's fall was swift and dramatic. However, it was also entirely predictable if considered the fate of Ansett Australia.
A fierce price war with Qantas had left Virgin financially vulnerable. Then came the global pandemic, grounding fleets and evaporating revenue almost overnight.
"Qantas was worried that Virgin Australia was going to attack its corporate travel market and go after the business market, so we had this brutal price war which left Virgin Australia a little bit weak," aviation analyst Peter Harbison told ABC News.
"And then when it was just starting to recover, COVID came along and it went into administration."
In April 2020, Virgin entered voluntary administration, with its boss blaming its failure to secure a federal government bailout.
Within months, the airline was sold to Bain Capital for $3.5 billion.
Bain Capital grounded budget offering Tiger Airways for good and set about repositioning Virgin as a mid-market offering.
Virgin returned to profitability in 2023. Mr Harbison said Virgin Australia offered fewer inclusions than Qantas but broader appeal than budget airline Jetstar.
"The lounges are more limited. Its product is really very much tailored to the mid-market, which does suggest quite a lot."
As of February, this year Virgin has an additional backer in government-owned Qatar Airways, which bought a 25 per cent stake in the airline and delivers more access to international routes.
"Now with Qatar, they have a very tidy deal which will very much help them in the future," Mr Harbison said.
