Virgin Australia has come under attack from high-profile investor Geoff Wilson, who has said the airline's chairman should be "embarrassed" by the airline's share price and demanded the board reconsider privatisation.
Meanwhile, chairman Elizabeth Bryan has defended her chief executive succession planning at the airline, with long-standing boss John Borghetti announcing his retirement in June but potentially not leaving the company for another 14 months.
Virgin CEO John Borghetti improved the airline's underlying profitability, but its share price doesn't reflect that.Credit: Louie Douvis
The country's second-largest carrier is about 90 per cent owned by major foreign airlines, and its board considered taking the company private earlier this year but eventually decided against it.
At Virgin's annual general meeting on Wednesday, Mr Wilson, from fund manager Wilson Asset Management, expressed frustration that his firm's shares in the airline had not increased in value to reflect the airline's improved underlying profitability, which he blamed on Virgin's "dysfunctional" shareholding structure and the resulting stock illiquidity.
“You refuse to enact what I believe is good corporate governance, and do the right thing by all shareholders and the company and all its employees," he told Ms Bryan. "Why don’t you privatise Virgin?"
Unimpressed: Geoff Wilson's fund management firm owns 12 million Virgin shares, and isn't happy about their performance.Credit: Kate Geraghty
Strategic airline investors Singapore Airlines, Etihad Airways and Chinese groups HNA and Nanshan each own about 20 per cent of Virgin and Richard Branson’s Virgin Group owns another 10 per cent.
Virgin's share price has remained stubbornly low since the company raised $1.1 billion in new capital from its major investors in 2016. At 21¢ on Wednesday, Virgin shares are the same price they were two years ago, while Qantas's have risen more than 90 per cent.
“If I was standing there as chair, I’d be embarrassed by that," Mr Wilson said.
Mr Wilson bought his 13 million shares in August last year - when shares were trading at about 20¢ - and was initially a vocal advocate for the stock, even prompting a 13 per cent share price spike when he told an investor conference the stock was “ready to take off”.
Ms Bryan - who was re-elected as chairman at Wednesday's meeting - said the board had spent "significant time" considering a privatisation, but decided it was not in the company's best interests to add another “level of complexity” as it tried to return to profitability.
“You can’t really snap your fingers and suddenly take a company from a listed company to a private company that’s run by five major shareholders, in all five corners of the world," Ms Bryan told Fairfax Media after the meeting.
"It was going to create more issues for the company that it would solve.”
Ms Bryan said that while Virgin's shareholding structure was "unusual", it was not dysfunctional, with its strategic investors providing valuable knowledge and experience.
“Geoff [Wilson] only bought in towards the end of last year... so it’s not as if he didn't know the company only had an 8 per cent free float," she said.
"It’s a little bit surprising that he attacked so strongly, feeling that he’d be done ill by the illiquidity of the stock."
Ms Bryan also said she had properly handled CEO succession at the carrier. At the meeting, she acknowledged that Mr Borghetti had been considering life after Virgin since at least 2015, when he joined the board of Coca-Cola Amatil.
Mr Borghetti announced in June he would not renew his contract at Virgin after the start of 2020 and the airline is carrying out a global search for a replacement, with no clear internal successor.
Asked whether she was consulted before Mr Borghetti sacked his second-in-charge and replacement in waiting John Thomas in 2017, Ms Bryan said it was "not my call on the way he manages his staff".
"As we got everything settled down we had the opportunity to start to listen to John, who was saying ‘I’ve been in this business for a long time’," she said.
Mr Borghetti had agreed to a long lead time before finally exiting the business, Ms Bryan said, to allow Virgin to consider candidates who may not be able to start a new role for several months.
Virgin Group executive Rob Sharp and Tigerair boss Merren McArthur are viewed as the most likely internal CEO candidates, and Ms Bryan said the board was looking at the pair in "the context of the global marketplace".
Virgin has been unprofitable for the past six years and has not paid a dividend since 2008.
On an underlying basis, excluding impairment costs and the cost of its business turnaround plan, Virgin reported a before-tax profit of $113 million last year - up from an $3.7 million loss - and last month said its first-half underlying profit was on track to improve by 22 per cent.
Revenue in the first quarter was up 9.7 per cent year-on-year, Virgin said in a trading update on October 22, while forecasting revenue growth of 10 per cent in the second quarter.