Etihad takes 3.96% stake in Virgin Australia

ETIHAD AIRWAYS, which owns just under 3 per cent of Aer Lingus, has taken a 3.96 per cent stake in Virgin Australia, the carrier part-owned by wealthy British entrepreneur Richard Branson.

The stake has been built up over recent weeks and Etihad’s chief executive James Hogan indicated yesterday that it would like to increase this holding to 10 per cent.

This is the fourth strategic investment in foreign airlines by Etihad, based in Abu Dhabi, in the past seven months. It also owns 29.2 per cent of Air Berlin and 40 per cent of Air Seychelles.

This move will be seen as bolstering Virgin Australia’s bid to loosen the grip of flag carrier Qantas on the corporate market.

Qantas, which is led by Irishman Alan Joyce, yesterday said it would make a pre-tax profit of between Aus$50 and Aus$100 million for the year to the end of June 2012. Analysts had expected a surplus of close to Aus$300 million.

Its international operations are expected to post a loss in earnings before interest and tax (Ebit) of Aus$450 million due to weak European economies and the high price of fuel.

Its domestic services are expected to deliver an Ebit of Aus$600 million. Qantas’s share price fell by 19 per cent after the release of this disappointing trading update.

Etihad said the equity investment in Virgin Australia “significantly strengthens” the 10-year strategic partnership signed in August 2010.

Etihad, which carried 8.3 million passengers in 2011, and Virgin Australian operate 24 flights a week between Abu Dhabi and Australia and giving passengers access to a combined network of more than 150 destinations.

Virgin Australia’s chief executive John Borghetti said Etihad’s move was “another demonstration of confidence” in its strategy, which is aimed at bolstering its appeal to business travellers.

Launched in 2000, Virgin is Australia’s second biggest airline.

Mr Branson’s Virgin Group owns 26 per cent of the business while Air New Zealand holds 19.99 per cent. It made a net profit of Aus$51.8 million in the six months to the end of December 2011.