Velocity loyalty program on the radar

There’s said to be good interest from potential buyers in Virgin’s Velocity frequent flyer program. .

Private equity may be passing up the opportunity to bail out Virgin Australia, but one aspect of the business they are keeping close tabs on is its Velocity Frequent Flyer loyalty program.

Velocity was always known to have been highly sought after as companies remained eager to buy its data to help them more accurately market their products to customers.

It is the reason that Virgin took on more debt to gain full ownership of the business last year, outlaying $700m to buy the remaining 35 per cent stake it did not own from Affinity Equity Partners.

But the division, which enables consumers to earn points for flights, hotels and other products and gifts, is only valuable if it is attached to a healthy airline.

Expectations are that Virgin Australia is heading towards a collapse, with no equity raising lined up and no other bailout plan believed to be available if the government did not agree to provide up to $1.4bn of funding assistance in the way of loans.

It is believed that Canberra politicians are divided on the merits of assistance.

The only private equity fund thought to potentially have any interest in an airline recapitalisation is TPG Capital.

TPG was part of a proposed buyout of Qantas before the global financial crisis more than a decade ago that never eventuated. But the thinking is that even that fund may not be keen to involve itself with what is a problematic sector, hamstrung by risk.

A likely scenario being discussed Thursday was one where Virgin Australia was placed into administration or receivership then bailed out by the government, preventing any perception that it was supporting foreign carriers.

Any collapse of Virgin resulting in it disappearing from the market was likely to weigh against the government from a political perspective.

Not only would a large number of the carrier’s jobs be lost, but the tourism industry would be decimated.

Another possibility is that the government works to see an American carrier come to the table and bail out the airline.