Virgin Australia to sell 35% stake of loyalty program

29 Aug 2014 by Clement Huang

Just a day after Qantas Airways revealed its A$2.8 billion (US$2.6 billion) loss over the past 12 months (see here), fellow Aussie carrier Virgin Australia has reported that it also made an underlying loss of A$211 million (US$197 million) in the past year.

While yields improved by 1.2 per cent over the period, operating costs also increased by 3.4 per cent, negating the benefits of the yield increase.

In addition, the low-cost carrier Tigerair Australia (which Virgin holds a 60 per cent stake in) also reported a A$46 million (US$43 million) loss and does not expect to achieve profitability until 2017.

In a bid to increase its cash balance, the airline has announced that it will sell a 35 per cent stake of its Velocity frequent flyer program. While no buyer has been named yet, an article by the Sydney Morning Herald stated that “a private equity group” would be purchasing the shares.

The decision is surprising, given that yesterday Qantas’ announced it would not be selling a stake in its Qantas Loyalty program as it was too profitable. The scheme has enjoyed double-digit growth and brought in earnings of A$286 million (US$267 million).

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Clement Huang

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