Virgin, Affinity prepare sale document for Velocity

[wannabeinvestmentbanker]

Just came across Bloomberg, according to the AFR, Virgin Australia and Affinity Equity Partners are preparing sale documents for the Velocity Frequent Flyer program, AFR reports in its Street Talk column, citing unidentified people.

• Affinity has been considering its position for some months: AFR

 

[Jousams]

Not idea.

 

[RooFlyer]

AusBT story:

Executive Traveller formerly AusBT | Travel News, Reviews & More

The global destination for business travellers and premium frequent flyers: news, reviews and expert guides to help you travel better.

www.ausbt.com.au

 

[oz_mark]

Just came across Bloomberg, according to the AFR, Virgin Australia and Affinity Equity Partners are preparing sale documents for the Velocity Frequent Flyer program, AFR reports in its Street Talk column, citing unidentified people.

• Affinity has been considering its position for some months: AFR

Been on the cards for months. Affinity prepares to fly on Virgin's Velocity

The new boss must be looking for ways to get some cash - not sure that selling off your loyalty program has ever been a good idea long term.

 

[ozstamps]

Flyer plans are generally the ONLY profitable part of airlines.

Not good news for flyers.

 

[HS-TQE]

It will be the biggest mistake if Scurrah/Affinity sells off VFF IMO. Joyce and QF looked at selling QFF off back when QF was in the financial doldrums, but chose not to do so.

AC had to buy its Aeroplan FF program back after selling it off over a decade ago.

 

[Carrots]

Seeing how I politely asked AFR to jam their subscription.... I can't read the article.

Is it actually VA looking to sell that is being rumoured, or is it Affinity looking to offload their 35% only?

 

[woodborer]

It seems to have gone from Affinity looking to offload its stake, to them looking for someone to buy the whole thing

 

[samh004]

This will be interesting in 5 years if it goes through

 

[desafinado74]

It will be a terrible move. Hopefully it is just unfounded rumours.

 

[jch]

Can we kiss goodbye any chance of lifetime status recognition in the future if this goes ahead?

 

[pauly7]

Seeing how I politely asked AFR to jam their subscription.... I can't read the article.

Is it actually VA looking to sell that is being rumoured, or is it Affinity looking to offload their 35% only?

Sounds like more than rumours this time, it is also reported that VA are also considering floating Velocity as opposed to a private sale.

Recent history tells us that selling off your FF program is a great adrenaline hit for a short time then becomes a nightmare for customers and the airline to try and manage. Loyalty is such a critical part of this business model, handing over even more control of that to a third party should be the last resort. Velocity is already difficult for them.

But it does lead to reinforce the point (yet again) that PS has been sent in with a big broom and high pressure cleaner to mop up JB's mess and try and stabilise VA. What I think is a little unexpected is the extent to which he is needing to clean house..... which probably means that what he has discovered has been hidden away from public view - well certainly from observers like us and the press, but clearly not VA's long suffering owners who have very clearly given him a mandate to do whatever it takes to fix the problem.

 

[HS-TQE]

One has to question whether SQ may be interested in a stake VFF to maintain access to VA's FF base, in trade-off for selling their 20% stake in VA to other parties e.g NH or DL (or release to the open float)

As it's assumed by many, one of the (if not the primary) reason why SQ still has their stake in VA is to maintain access to the FF base to fill their own planes on the AU-SIN routes.

This would allow SQ to maintain access to Australian FF flyers without directly investing in VA, reducing the risk for SQ.
In the extreme (but least likely) case of VA going under entirely, it'll allow SQ to maintain access to a base of Australian FF flyers should VFF be spun off.

 

[wannabeinvestmentbanker]

New AFR street talk article this morning indicating the sales process looks serious on this attempt and is starting to ramp up with mandates handed out to investment banks.

 

[woodborer]

So the basics:

1) Affinity want out
2) Virgin don't have the cash to buy the Affinity stake
3) Virgin are obviously interested in where it goes
4) If Virgin do sell some of their stake, most likely they will maintain a controlling interest

 

[AustraliaPoochie]

Not sure if VA is interested in open floats these days, in regards to their share holdings.
I know a person who had bought VA shares, I think it was for a $1xx_ when it was open a long time ago.
About 12 to 18 months ago, a compulsory/voluntary unmarketable share sale letter came, their share value is a measly Aud$0.18!

 

[dxwell]

I don't consider myself a sophisticated investor, but I wouldn't go near an airline. Past performance IS an indicator of future performance.

 

[pauly7]

New AFR street talk article this morning indicating the sales process looks serious on this attempt and is starting to ramp up with mandates handed out to investment banks.

Imagine if QFF snapped it up

 

[Scarlett]

Imagine if Airpoints snapped it up... (the horror)!

 

[Bagpuss]

As others have commented this has been commented on many times over the years.

Affinity weren’t in this for the long haul and now want to reap the financial rewards. (What inventors want, invest and sell at a profit). I can’t find any articles, but I’m sure when they bought it, they held a right to offload it back to Virgin at any point. Which Virgin probably doesn’t want.

I would expect they will sell their investment and Virgin may add in scope for the investment to rise up to 49% of the business immediately, if they need the money now or in the future should they need the money.
One article from last year (no sign in needed) a Flybuys tie up would make a lot of sense and I think would have huge value to the program. Wesfarmers may find an Affinity with Velocity

Also, there’s lots of comments about Virgin’s finances and many reports Virgin owes its shareholders $1bn through loans which they need to be repaid. This isn’t correct, Virgin raised $1bn through issuing new shares. When the shareholders bought the shares it protected their ownership levels of the company. Companies do this all the time and is an effective way to raise funds, it’s not a loan whatsoever. To be clear they do have some loans, but the $1bn comments are misleading.

Virgin Australia is raising $1 billion in new equity

Virgin Australia is raising more than $1 billion in equity as well as targeting deep cost cuts of $300 million a year from aircraft retirement, crew, catering and maintenance. In early trade, Virgin’s shares dropped more than 14% to $0.252 in reaction to the news. Australia’s second domestic...

www.businessinsider.com.au