One of the world’s most prolific and successful aviation entrepreneurs has held a secret stake in Virgin Australia for at least eight years, but is now looking to sell in a move that could trigger a larger shake-up in the airline's ownership.
Several sources confirmed that Brazilian-American businessman David Neeleman owns about 1 per cent of Virgin’s shares, in a stake worth close to $18 million, making him the airline’s sixth largest shareholder on its tightly held register.
Prominent airline entrepreneur David Neeleman, who has been trying to sell his stake in VirginCredit: Bloomberg
The stake has come to light just as Mr Neeleman is trying to offload his shares which are held anonymously including through the Texan investment firm Dimensional Fund Advisers.
Mr Neeleman has been a long-time adviser to the financially distressed Chinese conglomerate HNA, which has also reportedly been looking to sell its 20 per cent stake in Virgin as part of a worldwide asset sale.
Sources close to the company suggested Mr Neeleman was disappointed with the company's performance and the sale would also test the appetite of potential buyers for HNA’s much larger stake.
Mr Neeleman is considered one of aviation’s most accomplished entrepreneurs and his sale follows Virgin’s ongoing financial weakness and its decision to not take the ASX-listed company private.
Virgin is more than 90 per cent owned by other international airlines, and its future as a listed company has been under question. Credit: James Alcock
Mr Neeleman co-founded Canada’s second largest airline, WestJet in 1996, launched the United States' sixth largest carrier JetBlue Airways in 1999, and started the Brazilian airline Azul in 2008. He also co-owns Portugal’s national carrier TAP.
Virgin’s strategic airline investors control more than 90 per cent of the airline, meaning Mr Neeleman owns a significant portion of the 8.5 per cent of its shares in its “free float”, which are the shares able to traded on the stock market.
Singapore Airlines, Etihad Airways, and the Chinese conglomerates HNA and Nanshan each own about 20 per cent of Virgin, while Richard Branson’s Virgin Group owns another 10 per cent.
Dimensional first bought a sizeable parcel of Virgin shares in late 2010, when shares were traded at around 38¢. On Friday they were trading at 22¢.
Multiple well-placed sources have told Fairfax Media that Mr Neeleman has been looking to sell his stake in Virgin for several years.
One said Mr Neeleman was fed-up with Virgin’s continued weak financial performance, and feared another capital raising from its institutional investors could be required to fund an order of new Boeing 737 Max aircraft, which would dilute his investment.
Virgin ran at a $653 million loss last year, while its shares are largely unchanged over the past 12 months at around 22¢. Its main rival Qantas delivered a $980 million profit last year and its shares have fallen slightly, from $6.02 to $5.71 over the same period.
Virgin's decision to put privatisation on ice earlier this year solidified his view to sell, the source said.
In June, Mr Neeleman sought to raise $100 million to launch a new low-cost airline in the US, to start flying in 2021.
Mr Neeleman’s investment in Virgin is worth close to the $US13 million ($17.9 million) that he is reported to have personally invested in Azul.
Fairfax Media sent a list of questions to Mr Neeleman via Azul, the Brazilian airline he chairs, but no response was received.
A Virgin Australia spokeswoman said it was not appropriate for the airline to comment on its share register.
The revelation of Mr Neeleman’s investment in Virgin comes amid ongoing scrutiny and uncertainty around the company’s ownership structure.
Along with HNA, Etihad has also reportedly considered selling out of Virgin as it deals with its own financial woes and winds back its global investment strategy.
Virgin’s board said a year ago that it would consider mopping up its smaller shareholders and privatising the company but in February announced that was off the cards.
The company is also looking for a new chief executive to replace John Borghetti by the end of next year.
Prominent investor and minor Virgin shareholder, Geoff Wilson from Wilson Asset Management, said this week that Virgin’s “dysfunctional” ownership structure was responsible for its languish share price.
Contact the reporter: patrick.hatch@fairfaxmedia.com.au