Virgin Australia’s Bain makeover positions airline for $2.3bn ASX listing

Five years after its destructive collapse, Virgin Australia will make its long-awaited return to the ASX by the end of the month, hoping to slide into Qantas’ share price slipstream.

Virgin Australia’s US owners Bain Capital are betting that investors have accepted the airline is a different company to what it was pre-pandemic, after pressing go on a planned return tothe ASX that will see it list as a $2.3bn business.

Under the Initial Public Offer, more than 236 million shares will be sold to fund managers and retail investors at $2.90 apiece, raising $685m.

Despite the US tariff turmoil creating widespread uncertainty across the airline industry, it’s understood Bain is confident the time is right for the float given the strength of the domestic duopoly, the lack of serious competition and new CEO Dave Emerson.

Virgin’s operational improvement, the tie-up with Qatar Airways and imminent return to long haul international flying, plus Qantas’ own skyrocketing share price were also underlined in investor briefings led by Mr Emerson and chief financial officer Race Strauss.

Other selling points spelt out to investors, included record half year earnings and a stable industrial relations environment with Virgin Australia set to “reward” its 8000 employees with $3000 worth of share rights, amounting to just over 1000 shares on the listing price.

The initial public offering will amount to a 30 per cent stake in the airline and reduce Bain’s own shareholding from 70 to 40 per cent.

Qatar Airways holds 23.4 per cent, and Virgin management and employees will own 6.4 percent of the company.

New Virgin Australia CEO Dave Emerson. Picture: supplied

Mr Emerson, who took the reins of Virgin from Jayne Hrdlicka in March, gave the annual gathering of international airline CEOs, the IATA AGM, a miss, in order to finalise plans for the IPO.

A previous attempt by Bain to launch an IPO in 2023 was thwarted by the loss of key people but the amount of groundwork undertaken meant the revived plan was executed in the space of just a few months.

As well as focussing on Virgin’s financial and operational strengths and favourable market conditions, Bain stressed to potential investors the airline was a much different company to what it was prior to the 2020 administration.

At the time, Virgin’s share price had sunk to a paltry 9c from its $2.25 listing price in 2003, after years of losses, brought about by a lack of financial discipline and fleet mismanagement.When Bain swooped in and installed Ms Hrdlicka as CEO, Virgin Australia underwent a rapid transformation from full service to “value carrier” targeting leisure travellers and small and medium enterprises, rather than competing head on with Qantas.

The Frankenstein fleet was reduced to a single aircraft type (Boeing 737s), free snacks dispensed with, the lounge network streamlined and long haul flying axed.

Although a good chunk of Virgin’s corporate customers jumped ship to Qantas, the flying kangaroo’s own woes helped the smaller airline flourish and soar back to profitability, resulting in recording earnings of $439m for the half year to December 2024.

In fact Virgin performed so well, it briefly overtook Qantas as the largest single carrier of domestic passengers in December after picking up more aircraft from Rex when it sank into administration.

Reaction to the confirmed IPO plan was generally positive given last year’s successful listing of Guzman y Gomez, which saw shares surge 36 per cent on debut and continue to gain value since.

Market analyst at eToro, Josh Gilbert said there was no question Virgin had made a remarkable turnaround under its US owners and the IPO would be “one to watch closely”.

“Under Bain’s direction, Virgin Australia has streamlined operations, focussed on profitable domestic routes, which makes it far more attractive to investors,” said Mr Gilbert.

“Having only one real competitor in the landscape, Qantas, makes the offer uniquely appealing.”

Mr Gilbert pointed out Qantas’ performance had been a “massive win for investors with shares up around 75 per cent over the past year and a first profit of $1.39bn”.

“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 (30 per cent) discount to Qantas,” he said.

On the downside, Mr Gilbert said investors should be mindful of the “razor-thin margins” in the airline sector, and cyclical risks particularly if demand cools amid slowing consumer spending.

The uncertainty caused by the threat of US tariffs on raw materials used to manufacture aircraft, engines and parts, dominated discussion at the IATA AGM in Delhi that wrapped up on Tuesday.

In his closing remarks, IATA director general Willie Walsh said “everyone was concerned about tariffs” and how they would impact demand and costs.

“Tariffs are creating uncertainty and uncertainty obviously, is something that business people don’t particularly like,” said Mr Walsh.

“I think we just want to manage through this period and get back to a more normal operating environment.”

June 24 looms as re-listing day for Virgin Australia, after the prospectus is lodged in coming days.

The Transport Workers Union acknowledged the public float represented a “huge opportunity to continue to build a strong second airline” and urged Bain to honour its commitment to employees”.

“This was an airline on the brink of devastation and is now back to making record profits,” said TWU assistant secretary Emily McMillan.

“While an IPO has the potential to further grow the airline and increase opportunities for workers and the travelling public, we must see Virgin make clear that it will continue to consult with its workforce.”