Virgin Australia now SIA's associate, may be looking to raise funds

SINGAPORE Airlines Limited (SIA) on Tuesday announced that Virgin Australia Holdings Limited (VAH) is now an associated company of the SIA Group.

SIA now holds 22.8 per cent interest in VAH. Goh Choon Phong, SIA's nominee director, now sits on the VAH board.

Over the last few years, SIA, Air New Zealand and Etihad have emerged with a combined stake of about 70 per cent in VAH. Sir Richard Branson's Virgin Group also has a 10 per cent stake.

According to The Australian, VAH appears poised to raise US$300 million (S$334 million) in the US after ratings agencies Moody's and Standard & Poor's inaugurated coverage with a stable outlook.

The last time VAH was in the market raising funds was after the A$770 million raising last year secured by aircraft and its controversial A$350 million capital raising from airline investors, The Australian said.

Virgin has yet to announce a raising but said it would update the market "should there be any transaction to announce''.

"As we have said in the past, we continually look at a range of different options to diversify our funding sources and enhance our liquidity profile,'' a spokeswoman was quoted as saying.

S&P said Virgin's credit metrics would bottom out this financial year but the airline group would remain in the "highly leveraged'' category for the next two years. It noted the airline's 2013 and 2014 results had been hit by the capacity increases put in by domestic airlines but it expected competition to temper in fiscal 2015 and translate into better yield and earnings.

It also expected the higher-margin corporate or government travel segment to contribute more to revenue, estimating that the premium yield gap enjoyed by Qantas over Virgin had fallen from 40 per cent in 2010 to 25 per cent this year.

It also saw the ownership structure involving investments by Singapore Airlines, Air New Zealand and Etihad as a plus.


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