Virgin Australia says it has decided not to privatise the airline, but will deliver relief to long-suffering minority investors by buying up thousands of shareholdings too small for them to sell.
The carrier's chairman Elizabeth Bryan flagged at its annual general meeting in November that its board was considering whether to privatise the company, which is 90 per cent controlled by five major investors.
Virgin will buy out its smaller shareholders.
Ms Bryan said on Thursday that following discussions with its major shareholders - Etihad Airways, Singapore Airlines, HNA Group, Nanshan Group, which each own about 20 per cent; and Richard Branson's Virgin Group, which owns 10 per cent - the board had decided again privatising. It did not say why.
However, Virgin will offer a buyback to the roughly 21,000 of Virgin's 38,000 investors whose shareholdings are worth less than $500 and are unmarketable.
"This facility will give those shareholders the ability to sell their shares at an appropriate price and in a convenient, cost-effective manner," Ms Bryan said.
The total value of unmarketable parcels is about $5 million, making up 0.2 per cent of issued capital.
Back in black
The airline on Wednesday said it had swung back into the black for the half, posting a $4.4 million after-tax profit compared to a $21.5 million loss in the same half last year, off the back of passenger growth, rising ticket prices and by winning more business travellers.
“Clearly we’re winning more and more corporates and that’s a good thing," chief executive John Borghetti said. "The second thing is capacity is matching demand a lot better than it did previously."
Virgin reduced domestic services by 2.2 per cent, while the services it did fly carried more passengers - with 81.9 per cent of seats filled in the last half, compared to 77.9 per cent last year.
Revenue per available seat kilometre - a measure of how much an airline earns per service it operates - improved 7.4 per cent.
Mr Borghetti said those operational gains combined with an improving economy driving more corporate and leisure travel to lift its performance.
However, earnings from Virgin's Velocity loyalty business fell $9.8 million to $56.8 million, even on revenue that was 15 per cent higher.
The airline said it had invested in building a new app and technology system, and had new partners and initiatives to roll out in 2019.
That was designed to offset the effect of recent laws capping credit card interchange fees which had dented banks' spending on loyalty points, which Mr Borghetti said had "impacted us probably a little more than we expected".
"We're in the little gap period where there's a mismatch between the two - the impact of the [credit card fee changes] and the product launches that are coming out," he said.
Velocity membership numbers jumped by 600,000 to 8.6 million, and Mr Borghetti said it was still in "growth mode".
The airline was on a positive performance trajectory and would return better underlying earnings in the second half of the year compared to 2017, Mr Borghetti said, but did not give guidance.
Virgin has reported full-year net losses every year since 2012, and Tuesday's result is one of only three half-year profits over the same period.
Without the cost of the its business turnaround plan, including removing older aircraft from its fleet, Virgin ran at an underlying profit before tax of $102.5 million, up from $42.3 million in the first half last year.
Virgin also announced a new route from Sydney to Hong Kong to start in the middle of this year, joining its service to Hong Kong from Melbourne that launched last year.
UBS analysts Simon Mitchell said the result showed Virgin was catching up to Qantas on revenue momentum, but "there remains a major mismatch between profit and cashflow", with cash flow conversion of about 75 per cent, compared to 105 per cent at its larger rival.
Investors can opt out of the buyback, which will be at a price of 30¢ per share. The stock closed down 3.8 per cent at 25¢ on Wednesday. It has rallied from about 19¢ in November, partly on speculation a privatisation bid was imminent.