Air NZ considers selling Virgin Australia stake

Virgin Australia’s biggest shareholder, Air New Zealand, may sell part or all of its 26pc stake in the airline.

Virgin Australia is undertaking a broader review of its capital structure.

Air New Zealand says it may sell part or all of its near-26 per cent stake in Virgin Australia Holdings.

Air New Zealand, which is Virgin Australia’s (VAH) biggest shareholder, said First NZ Capital and Credit Suisse will advise it on its options.

Trading in Virgin Australia shares was halted this morning, pending the New Zealand flag carrier’s announcement.

Air New Zealand’s stake in Virgin Australia is worth around $348 million.

Tony Carter, Air New Zealand’s chairman, said in a statement that the company didn’t want a large minority equity stake in Virgin Australia as it focuses on its own expansion opportunities.

Last week, Virgin Australia secured a $425 million loan facility from Air New Zealand and three other major shareholders, Etihad Airways (24 per cent stake), Singapore Airlines (15.6pc) and Virgin Group, as it announced a review of its capital structure.

Air NZ said it intends to co-ordinate its plans with Virgin Australia’s broader review of its capital structure.

Christopher Luxon, Air New Zealand chief executive, has resigned from the board of Virgin Australia as part of the company’s review of its shareholding.

Mr Luxon said the airline was supportive of the transformation that Virgin Australia had undergone over the past five years, under John Borghetti’s leadership.

“We look forward to continuing our partnership on the Tasman alliance, providing customers of both airlines with the most comprehensive trans-Tasman network,” Mr Luxon said.

Air New Zealand intends to co-ordinate its review of its investment in Virgin Australia with that airline’s broader capital structure review.

At 3pm (AEDT), Virgin shares were down three cents at 34.5 cents, valuing the company around $1.2 billion.

The airline posted a net profit of $45.7 million in the half year to December - a major turnaround from $53.1 million net loss 12 months earlier.

The result included a $33.8 million benefit from lower oil prices, partially offset by a $19.2 million impact from the Bali volcanic flight disruptions in November.

Virgin said in February it expects to see a similar gain from further oil price falls in the second half of fiscal 2016. Mr Borghetti flagged an annual profit but stopped short of providing specific guidance.

Dow Jones, Business Spectator, AAP