Virgin Australia Announces Turnaround Plan
Joe Cortez June 16, 2016
Plan backed by shareholders includes equity raising and fleet reduction.
The new Virgin Australia is bracing itself for change from a plan that could raise an additional $626 million in cash for the carrier. The Wall Street Journal reports stakeholders for the carrier have signed off on the stock sale, while trimming their fleet at the same time.
Under the fundraising plan, the carrier will offer stockholders the opportunity to purchase additional shares in the airline for around 16 cents per share. The stock buy-up limit will be capped at the current amount of stock already owned by shareholders. Current investors HNA Group, Singapore Airlines and Virgin Group will buy the remaining unpurchased shares.
While the airline will be looking to raise money, additional cost savings could come from shedding aircraft from their fleet. The plan calls for the airline to significantly reduce the ATR propeller airframes, while eliminating their Embraer E190 aircraft fleet entirely.
The turnaround plan comes after months of poor performance, when the airline battled competitor Qantas for international passengers. Although Virgin Australia was able to turn a net profit of $4.6 million in the six months that ended 2015, the airline reported losses of around $35.5 million the year before. In turn, the airline was forced to take a loan from four airlines, including Air New Zealand and Etihad Airways.
Virgin Australia’s turnaround plan has been approved by their investor group, which includes China’s Nanshan Group and Air New Zealand. Under the proposal, Singapore Airline’s ownership of the airline could increase to 25.9 percent, while both Chinese investors (HNA and Nanshan) could increase their stakes to just short of 20 percent each.
[Photo: Virgin Australia]
