From the Virgin Australia newsroom:

The existing partnership between Virgin Australia and Qatar Airways will be strengthened with today’s announcement that Qatar Airways Group intends to acquire a minority 25% equity stake in Virgin Australia.

Qatar Airways Group announces intention to acquire 25% minority stake in Virgin Australia – Virgin Australia newsroom

In short, the 25% investment into VA by Qatar gives Bain Capital a chance to release some of their invested funds, given the delays to the planned Virgin IPO. The deal also includes a wet lease arrangement using QR metal + meat (aka airframes and employees) from Australian ports to Doha.

With this strategic play, Virgin has fast-tracked their return to long-haul operations, which they discarded during the voluntary administration. The administration was probably a blessing in disguise for VA’s long haul business allowing them to dispose of the mixed fleet. Running a small fleet of different brands made up of only 6 x B773s and 6 x A332s meant more complexity than required for the operation’s size. VA should have asked Ansett how that worked out…

Intriguingly, 3 x B773 airframes ended up with Qatar (ex VH-VPE, VH-VPF and VH-VPH) and retain their Virgin Australia fit out. So Virgin may be running their previous long haul product, on ex-VA now QR airframes!

Network and competition

Leveraging the QR network is a smart play, opening up connections to EMEA and parts of Asia. It’ll certainly strengthen the value of the Velocity membership (although Velcotiy member loyalty is yet to be seen given the recent changes to the program). East Asia and the Americas will likely remain serviced through the SQ and Delta partnerships.

One of the most strange parts however, is Qatar’s membership with OneWorld – the alliance that Qantas is a founding member of. Apart from some awkwardness, I can’t see it affecting QF too much, with Qantas customers flying to the Middle East likely taking advantage of QF’s partnership with Emirates.

From the QR side, it’s a smart move given the debarcle surrounding QR’s numerous rejected applications for additional slots into Australia. This provides a workaround through code-share opportunties (not to mention the highly visible QR-branded aircraft servicing the routes). QR may also be hoping some of VA’s brand equity helps to improve the public’s view of Qatar which was rightfully damaged after the 2020 Doha Airport strip search incident (source).

Some pundits may even consider the new parternship an upgrade from the previous relationship with Etihad, given the latter’s smaller place within the market. Etihad probably feels twice-burned given the loss of their 21% equity position during Virgin’s voluntary administration. (source)

Securing a large investemnt from a cornerstone like Qatar helps Bain Cap’s narrative on the return of Virgin to public ownership. Assuming the deal is approved by the various regulators,

Where to from here?

1. Let’s see if the regulators approve this deal (or if there’s interference similar to the additional slot issues).
2. Will we see a reduction in airfares to Europe via the ME through improved competition? Or is the QF-EK alliance so dominant?
3. What other growth plans does this unlock for VA – either through patnership, capital or both.

A stronger Virgin is always welcome in the Australian market, especially after the difficulties seen with REX & Bonza.