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Virgin may resume 'robust' Qantas rivalry


Virgin Australia could reignite its price war with rival airline Qantas following its $852 million capital raising.

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Australia’s number-two carrier last week announced a fully underwritten equity raising, which Bell Potter analyst John O’Shea says could give the company the means to compete for customers with its bigger rival.

“The capital raising provides some short-term funding,” O’Shea said.

“We expect this to translate into a resumption of robust competition between QAN (Qantas) and VAH (Virgin Australia), which decreases the likelihood of any material increases in domestic airfares any time soon.”

O’Shea noted that Virgin Australia, which is shedding jobs and planes in an effort to cut $300 million of annual costs, still faces medium to long-term challenges.

He said soft demand for leisure travel and competition in the corporate market was already keeping downward pressure on economy fares.

China’s Nanshan Group completed its purchase of a 19.98 per cent stake in Virgin Australia from Air New Zealand.

Nanshan paid 0.33 cents a share, putting the purchase price at about $233 million, and leaving Air NZ with a 5.9 per cent stake in Australia’s second biggest airline.

It joins fellow Chinese group HNA, and Etihad, Singapore Airlines and Sir Richard Branson’s Virgin Group as a major shareholder.



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