Virgin Australia sells stake in Velocity to private equity in move to ‘accelerate growth’
Virgin Australia is to sell 35 per cent of its Velocity Frequent Flyer program to private equity in a move the airline says will accelerate the growth of its loyalty division and enable it to realise its “full potential”.
The sale of the minority stake to Affinity Equity Partners will boost Virgin’s cash balance by $336 million with the deal, which values the program at $960m, expected to be completed by the end of October. It is subject to conditions, including approval by the Foreign Investment Review Board.
The announcement came as Virgin reported an underlying pre-tax loss of $211.7 million, in line with market expectations, as the airline followed Qantas in posting a grim set of figures amid tough market conditions.
Virgin Australia chief executive John Borghetti described the past 12 months as “one of the most difficult operating environments in the history of Australian aviation”.
If the Velocity business is so successful why is it the business that it has been created to support and drive loyalty – Virgin Australia has reported a loss of 356m and needs to flog the loyalty business to try and balance its books.
I think Byron Sharp was spot on about loyalty programs and their very limited benefit to businesses.