Qatar Airways to take quarter stake in Virgin Australia

Qatar Airways plans to take a 25 per cent stake in code-share partner Virgin Australia in a move that will expand the Gulf carrier’s global network and help Australia’s No.2 airline stretch its wings.

Qatar plans to acquire the minority stake from Virgin Australia owner Bain Capital, with both carriers saying it will give passengers more airfare options.

The deal, if approved by regulators, will allow Virgin to launch flights from Perth, Brisbane, Melbourne and Sydney to Doha, connecting into Qatar Airways’ global network.

The extra flights are expected to open up more than 100 new connecting itineraries across Europe, the Middle East and Africa for Australian travellers.

Qantas shares plunged almost 3 per cent on the news to $7.20 in early trade.

The move aims to give Qatar better access to a market where it was denied more connections by the Federal Government last year — a contentious move the airline argued was unfair and protected rival Qantas’ dominant position in the market.

Virgin said the stake would allow for a measured entry into long-haul international flying by the middle of next year, with significant flow on benefits for Australian travellers and the potential injection of $3 billion into the economy over the next five years.

“A deeper strategic relationship between Virgin Australia and Qatar Airways will drive increased competition in Australian aviation,” the joint statement said.

“This will ensure Australian consumers have access to even better value airfares and greater choice.

“Domestic competition in Australia is dependent on Virgin Australia thriving through the inevitable ups and downs of aviation.

“Qatar Airways group’s strategic investment will provide access to the critical scale and expertise of a world-leading global airline.”

Virgin said Qatar’s buy-in also serves as a cornerstone investment ahead of its long-awaited return to trade on the Australian Securities Exchange

Virgin crumbled under the weight of $6.8b in debt during the pandemic and was rescued in 2020 by Bain in a $3.5b deal that wiped out much of the claims of unsecured creditors. Bain last year postponed plans for an initial public offering for the airline.

Doha-based Qatar is also the largest shareholder of British Airways owner IAG, and owns about 10 per cent of Hong Kong-based Cathay Pacific and Latam Airlines.

Virgin Group and Queensland Investment Corporation will retain shareholdings in Virgin Australia.

Virgin Australia chief executive said Jayne Hrdlicka said the deal with Qatar was “the missing piece” in the carrier’s longer-term strategy.

“It will further strengthen Virgin Australia’s ability to compete over the long term, which will inevitably translate into more choice and even better value airfares for consumers as well as additional Australian aviation jobs,” Ms Hrdlicka said.

“Qatar Airways has been a valued code-share partner of Virgin Australia since 2022. This investment by the world’s best airline will deepen an already strong partnership by bringing critical scale and the best industry expertise to support our long-term competitiveness and growth.”

The deal is expected to require approval from the Australian Competition and Consumer Commission and Foreign Investment Review Board.

Treasurer Jim Chalmers said it would be inappropriate to comment on the deal given he was the decision-maker on foreign investment applications.

“I will say more broadly, we do want to see a strong, competitive airline industry that delivers for consumers,” Dr Chalmers said.

Bain Capital partner Mike Murphy said after a decade of losses resulting in administration, Virgin Australia had emerged as “a strong and profitable company with an attractive market position, a loyal customer base, and a promising growth trajectory”.

Qatar has also announced several acquisitions in Africa, including buying a 25 per cent stake in South Africa’s SA Airlink and the pending purchase of 49 per cent of Rwanda’s RwandAir.