Qatar Airways, the Qatari Government-owned carrier, has unveiled plans to acquire a 20% stake in Virgin Australia (VA), which could significantly reshape the Australian aviation landscape. The airline is negotiating with VA and aiming to challenge the Qantas Group.
A Potential Deal on the Horizon
Sources close to Virgin advisors have also revealed considerations around selling a stake to Singapore Airlines. Reports suggest that the deal could be announced as early as next week. This news contrasts with the VA’s plans for an Initial Public Offering (IPO). Bain Capital, the Boston-based equity firm that owns Virgin Australia, has reportedly put the IPO on hold again due to weak market conditions.
A History of Tensions
The relationship between Qatar Airways and the Australian Government has been fraught with tension over the past year due to several incidents. In October 2020, several Australian women underwent ‘offensive, grossly inappropriate’ strip searches at Qatar’s Hamad International Airport. Furthermore, the Australian Government blocked Qatar Airways’ bid to launch 28 new flights into Australia last year due to ‘national interest’, a decision that has been widely criticised.
The Financial Backstory
In the wake of the pandemic, Virgin Australia requested a $1.4 billion bailout loan from the Morrison Government. However, the Government preferred a market-led solution and hired ex-Macquarie CEO Nicholas Moore to monitor the situation. Bain Capital became the new owner of Virgin Australia after creditors approved a $3.5 billion deal in 2020.
Qatar’s Global Investments
The Qatari Government owns Qatar Airways, and the country’s sovereign wealth fund, the Qatar Investment Authority (QIA), has substantial holdings in various sectors worldwide. They’ve invested in Sainsbury’s supermarket chain, London’s Canary Wharf Group, Harrods, and the Sony Centre in Berlin in the UK. In the US, QIA holds stakes in companies like Uber Technologies Inc., the Empire State Realty Trust, and Manhattan Plaza in New York.
In France, they’re part owners of luxury goods conglomerate LVMH Moët Hennessy Louis Vuitton SE, Paris department store Printemps, and energy giant Total SA. They also own European football teams Paris Saint-Germain and sponsor FC Barcelona and the Sydney Swans AFL team. In the media, the Qatari Government also funds Al Jazeera, the international news network. QIA has substantial holdings in financial institutions such as Credit Suisse and Barclays.
A New Chapter for Virgin Australia?
Given the breadth and depth of QIA’s investments, any stake in Virgin Australia would appear to be a small change. However, this potential deal could mark a new chapter in the history of Virgin Australia and the Australian aviation industry.