Bain Capital targets 2023 for Virgin Australia float

Bain Capital is targeting 2023 for an initial public offering of its airline Virgin Australia, say sources.

The hope of the private equity firm is that this time frame would enable volatility from Omicron to have played out, they say.

By 2023, the anticipation is that prospective investors in any float would have a clearer perspective on the earning horizon for the group, with more normal passenger demand returning and it being in a better position to forecast earnings.

Bain purchased Virgin out of voluntary administration in 2020 for $3.5bn, completing the deal in November, and The Australian reported in December last year that Bain was open to a possible IPO of the carrier.

Suggestions are that the Boston-based buyout fund will stage a partial exit from the business to get some money back through the door, likely retaining between 50 and 60 per cent of the business.

The understanding is that Bain has not appointed any investment banks for a transaction, although discussions had taken place in recent months with advisers about its future prospects.

Investment bank Goldman Sachs is expected to be on the ticket should any listing occur, given that the American investment bank advised Bain in the past.

Sources say that the private equity firm is expected to start assessing the possibility of an exit through a float around July this year, but this would likely be for a listing in 2023.

Airlines hoping for a rebound in demand for flights after two years of being hampered by the global pandemic have been dealt a disappointing blow with the Omicron Covid-19 virus strain as it makes passengers jittery about travel.

Staunch rival Qantas told the market this month that it was reducing its planned domestic capacity by about 10 per cent from February through to the end of March due to border opening delays to Western Australia.

It added that activity was still at a fraction of its pre-Covid levels.

Financial accounts lodged with the corporate regulator in November show Virgin recorded an underlying loss of $76.8m as domestic and international revenues fell sharply because of tight health restrictions and limits on flights.

To June 30 last year, passenger revenues fell 70 per cent.

Virgin is run by former Qantas and Jetstar executive Jayne Hrdlicka and is targeting a 33 per cent share of the domestic market by increasing the frequency of flights and reach of its network.

Qantas and Jetstar have more than 70 per cent of the market, while smaller rival Regional Express is expanding its capital city network to include Melbourne-Brisbane flights.