Investors and stakeholders have greeted the terms of Virgin Australia’s public listing with enthusiasm as the country’s second-largest airline seeks to promote a more employee- and consumer-friendly image in the wake of rival Qantas’ record.
Bankers for Virgin Australia are offering shares in the airline to investors at $2.90 apiece for its much-anticipated relisting on the ASX after a four-year odyssey through administration and privatisation.
Flying higher: A Virgin Australia airliner about to land at Melbourne Airport.Credit: Alamy Stock Photo
Transport Workers Union assistant national secretary Emily McMillan said she was “cautiously optimistic” for Virgin’s IPO. “I think overall, it is positive.”
“Now we’re dealing with a stable, growing, profitable airline, which is what Australia needs – and certainly, what its workforce needs.”
As Virgin Australia struggled out of administration in 2020 and rebuilt a more simplified domestic business, Qantas – under the leadership of then-chief executive Alan Joyce – was engaged in a series of industrial relations battles that appeared to damage its public image.
Following a case that pitted Qantas against the TWU, the airline agreed in 2024 to pay $120 million in compensation to 1820 ground staff whose contracts were found to have been illegally terminated during the COVID-19 pandemic.
Private equity owner Bain Capital will sell about 30 per cent of Qantas’ biggest rival, expecting to raise $685 million via the initial public offering, which would value the company at close to $2.3 billion.
The $2.90 price tag for the stock represents a multiple of seven times the airline’s expected earnings this financial year, the bankers handling the sale said in their pitch to investors. That’s cheaper than Qantas shares, which trade at around 10 times expected earnings for the same period.
Virgin Australia’s IPO is ready to take off.Credit: Bloomberg
Sources close to the joint lead managers of the offering – Goldman Sachs, UBS and Barrenjoey – said demand from domestic and global anchor investors was “well in excess of the offer size prior to opening of the bookbuild”.
The IPO represents the culmination of years of waiting for the relisting of the airline. Bain Capital acquired the then-struggling carrier in 2020, taking it off the sharemarket after it had been placed in administration, facing soaring costs and the impact of the COVID-19 shutdown on travel.
In October, Bain sold 25 per cent of Virgin to Qatar Airways. Under that agreement, Virgin will begin offering expanded international flights using Qatar planes and crews to fly from capital cities to Doha later this month.
Jun Bei Liu, a fund manager at Sydney-based investment firm Ten Cap, said Virgin had been priced attractively. “We do think that with this pricing, the IPO will perform very well,” she said.
Liu holds shares in Qantas and said she was looking into investing in Virgin now.
The listing comes at an interesting time for sharemarkets, with billions of dollars’ worth of acquisitions and IPOs worldwide put on hold globally as Donald Trump’s trade war has rocked markets. However, the ASX has surged 15 per cent from its tariff shock low in April, opening a window for Bain to push through Virgin’s long-awaited return to the exchange. Qantas stock is at a record high.
Liu said: “We all know Virgin has gone through quite a meaningful transformation over the last few years, and it’s a much better business today.”
“It’s really good for private equity to leave some return on the table, with a good pricing [of the IPO] for investors to participate in this deal.”
The IPO offer puts the price tag for Virgin about 30 per cent below Qantas’ valuation, Liu noted. That discount was in part because Bain understands the airline has gone through its business cycles and needs to “build a track record as a listed business”, she said. But the recent market volatility linked to Trump’s erratic trade war was perhaps also a factor, she added.
Virgin Australia’s IPO is expected to reduce Bain’s 70.2 per cent stake in Virgin to 40 per cent. Qatar will own 23.4 per cent of the carrier, the airline’s management will own 6.4 per cent, and the remaining 30.2 per cent will be owned by the new sharemarket investors.
Fund managers have until Thursday afternoon to make their bids for the shares, while bids from brokers for retail investors are due by Friday morning.
The shares are expected to start trading on the ASX on June 26 under the proposed ticker VGN.
Virgin’s first run as a publicly traded entity didn’t go well. Even before its 2020 demise, most of the stock was locked up by a handful of airlines that were largely inert investors and unwilling to tip in additional funding to keep it going during the pandemic. Relatively few shares changed hands each day, and the stock rarely traded above its IPO price.
With Bloomberg
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning