Qatar Airways backed Virgin Australia is moving closer to long-planned IPO

Sydney: Bain Capital-controlled airline Virgin Australia is pushing ahead with plans for an IPO in June, despite the market turmoil caused by US President Donald Trump's trade war, people familiar with the matter said.

Virgin Australia's new CEO, Dave Emerson, has already started to brief potential domestic investors and will head to Asia for more meetings next week, said the people, who asked not to be identified discussing private information.

US private equity firm Bain bought Virgin Australia, the country's second-largest airline, in 2020 after it collapsed at the start of the pandemic.

After at least two years of planning, Bain is betting it can find a path to market for Virgin Australia through the price slumps that have ripped through stock markets worldwide. Billions of dollars worth of acquisitions and IPOs have already been put on hold globally.

There are no obvious tariffs that would disrupt an Australian airline, and there are weeks left before the shares would start trading in Sydney. There are no formal filings with a listing timetable that need to be changed.

Still, what looked like a window for Bain to sell has narrowed, at least for the moment. Virgin Australia's Covid-era shareholder wipeout was already hanging over any IPO, and the latest market slumps have made the task of returning to the stock exchange even more demanding.

"Trump's tariffs have made this exponentially harder," said Hugh Dive, chief investment officer at Sydney-based Atlas Funds Management Pty. "We've seen this movie before and it hasn't ended well for equity investors. This one will be tough to sell."

The S&P 500 index tumbled 12% through Tuesday since Trump unveiled sweeping tariffs - including a baseline 10% duty on imports from Australia - amid concerns the levies could trigger a global recession. Underscoring the current market volatility, Australia's benchmark S&P/ASX 200 index surged as much as 6.4% on Thursday after Trump announced a 90-day pause on higher tariffs, while hiking duties on China to 125%.

Virgin Australia's first run as a publicly traded entity didn't go well. Even before the carrier's demise in 2020, most of the stock was locked up by a handful of airlines that were largely inert investors and unwilling to tip in additional funding to keep it going through the pandemic. Relatively few shares changed hands each day, and the stock rarely traded above its IPO price.

Bain had previously looked to list Virgin Australia in 2023, appointing Goldman Sachs Group Inc., UBS Group AG and Barrenjoey Capital Partners Pty Ltd. to manage the sale. However, the deal was shelved in October that year.

This time around, the airline had overcome key hurdles to progressing toward an IPO in the weeks before the US tariffs were announced. Emerson took the helm in March, ending a year-long hunt for a replacement for former CEO Jayne Hrdlicka, who had said a new leader was needed to shepherd the company through an IPO.

The previous month, Australia's government approved Qatar Airways' purchase of a 25% stake in Virgin Australia, giving it a deep-pocketed cornerstone investor and access to the Gulf carrier's international network.

After more than a decade of losses, Virgin Australia has finally reported successive annual profits.

Net income in the year ended June 2024 more than quadrupled from a year earlier to A$545.4 million ($326 million). The airline spent several million dollars each year preparing for an IPO, its accounts show.

Bain still has to convince the market that the reborn Virgin Australia - simpler, lower-cost and less indebted - can survive profitably in the shadow of domestic giant Qantas Airways Ltd.

Qantas is more diversified because it also owns budget carrier Jetstar, and it runs a better loyalty business, said Billy Boulton, an analyst at Morgans Financial Ltd. Bain would have to price Virgin shares at a discount to Qantas to attract new shareholders, he said.

"If it's not cheap enough, why would someone own Virgin over Qantas?" Boulton asked. "It's the second fiddle to Qantas. People have to remember that."