Qatar Airways boss Akbar Al Baker snubs Virgin Australia

Chief executive Akbar Al Baker says Qatar Airways in not interested in buying a stake in Virgin Australia.

Akbar Al Baker says it is ‘good’ for Air NZ to sell its stake in Virgin Australia. Picture: Kelly Barnes.

The chief executive of Qatar Airways has ruled out buying any or all of Air New Zealand’s stake in Virgin Australia, saying the Gulf carrier only invests in “successful” airlines.

The rejection by Qatar Airways chief executive Akbar Al Baker comes as analysts at Credit Suisse warn that Virgin Australia needs to raise as much as $1 billion in new capital to repair its balance sheet.

That task to raise capital is likely to fall on Virgin’s existing shareholders — Etihad and Singapore — after Mr Al Baker indicated Qatar Airways had no interest in buying any of the 25.9 per cent stake currently being reviewed for sale by Air New Zealand.

Buying into airlines around the world forms a central plank of Mr Al Baker’s strategy to quickly grow the Gulf carrier. The airline has become the largest investor in British Airways parent International Consolidated Airlines Group and recently it also struck an agreement with Italian carrier Meridiana under which it could take a 49 per cent stake by midyear.

But Mr Al Baker was emphatic in his rejection of Virgin Australia, saying it was “good” for Air New Zealand to sell its stake in the Australian airline.

“No (we are not interested in Virgin Australia). We only buy into successful carriers,” Mr Al Baker told The Australian.

“You know their (Virgin’s) results. I don’t know what their problem is, you would have to ask (Virgin CEO) Mr John Borghetti and you have to ask his shareholders what is the problem.”

Virgin on Monday downgraded its profit outlook for the full year after revealing it was cutting capacity as election uncertainties and the waning resources sector weighed on its business.

Its intent to cut capacity by 5.1 per cent for the June quarter means the airline will post a loss in the second half that will take a chunk out of its full-year under­lying pretax profit, which is now expected to come in between $30 million and $60m.

Credit Suisse analyst Paul Butler outlined some of the malaise infecting Virgin’s balance sheet, saying a larger capital raising was necessary if the supply-demand dynamics of its business did not improve.

“Following the profit warning on Monday, we cut FY16 profit before tax by about 60 per cent and FY17 by 37 per cent,” Mr Butler said. “Pending the capital structure review, we maintain the view that a $1bn equity raising is required to strengthen the balance sheet to handle the risk of higher fuel prices and improve competitive position with Qantas.”

Virgin is reviewing its capital structure after its four major shareholders — Air New Zealand, Etihad Airways, Singapore Airlines and Virgin Group — agreed in March to a 12-month, $425m loan to shore up its balance sheet in the near term.

But the process has been complicated by the potential selldown of Air New Zealand’s stake that has set the scene for a takeover battle between Virgin’s other major shareholders, Etihad and Singapore Airlines.

Singapore Airlines has become the favourite to take some of Air New Zealand’s stake as the carrier is known to have been actively reviewing its existing stake in Virgin since last year. Last month it increased its stake in Virgin from 22.91 per cent to 23.11 per cent.