Virgin Australia’s two Chinese shareholders have ended up with almost 40% of the company after a $1.1 billion capital raising.
The raising gives HNA Innovation, China’s largest private airline operator, a shareholding of about 19.2% for an investment of $US300 million.
Nanshan Group, a privately owned Chinese conglomerate whose interests include Qingdao Airlines, has 19.98% of Virgin after buying out the majority of Air New Zealand’s holding in the carrier earlier this year.
The airline’s other major shareholders are Singapore Airlines, Etihad Airways and Virgin Group. Air New Zealand still has about 6% of Virgin.
Virgin said today it raised $A852 million through the capital raising at $A0.21 a share.
A short time ago, Virgin shares were up 4% to $0.250.
With the recently completed placement to HNA Innovation, the airline has raised $A1.011 billion. This will increase to $A1.1 billion when a top-up placement is completed.
The airline is also has a cost saving target of $300 million a year from aircraft retirement, crew, catering and maintenance. Cuts since 2013 have seen $408 million in annual overheads being stripped from the business.
The moves are designed to strengthen Virgin’s balance sheet, improve earnings and cash flow and support new opportunities for growth.
“We are very pleased that shareholders have shown their support for the group through their participation in the offer,” says CEO John Borghetti.
“Our renewed capital structure will strengthen our balance sheet, provide additional liquidity and support improvement in earnings and cash flow, while also funding initiatives for sustainable growth.”
In February Virgin posted a $62.5 million half year profit compared to a loss of $47.8 million the year before. The result, an improvement of $110.3 million, was the strongest since the first half of 2010.
Revenue was up 11.8% to $2.7 billion, reflecting a strong performance by Virgin’s domestic operations following the end to the seat war with Qantas.
Virgin has been positioning itself as more of a full service competitor to Qantas. It has a target of 30% of domestic revenue from corporate and government travellers by the end of 2017.