Etihad buys 4% stake in Virgin Australia

Abu Dhabi’s rapidly-growing Etihad Airways has bought a 4% stake in Virgin Australia, its fourth overseas deal since December as the airline tries to compete with Gulf rivals. The airline, founded eight-years ago, has already bought stakes in three other carriers in a push to chase the big Gulf airlines like Dubai’s Emirates and Qatar Airways. Etihad said it had acquired the 3.96% Virgin Australia stake for $35.6mn via market purchases over the past few weeks. “At a point in time, we would like to take it (stake) to a minimum of 10%, if we get the necessary approvals,” James Hogan, Etihad’s chief executive told Reuters. “This is a long game. There’s no race here. We have a 10-year commercial relationship with Virgin Australia. This is just step by step building.” The Virgin stake shows Etihad’s willingness to make acquisitions to compete with its larger Gulf rivals, which are increasingly challenging European, Asian and Australian carriers on long-haul routes. Hogan explained that the growth strategy is designed to make it the Gulf’s top carrier. He said the airline would take delivery of 100 aircraft over the next 8 years but still would not be the biggest airline in the Gulf. “We believe that by investing and partnering it enables us to extend our network,” he said. In December, the unlisted airline raised a stake in Air Berlin to nearly 30% from just under 3%, for about €73mn. Last month, it bought a 3% stake in Irish airline Aer Lingus as a precursor to a commercial tie-up that could help the carrier gain more European routes. It has also bought a 40% stake in Air Seychelles. Virgin Australia’s shares rose 2.4% on the Australian bourse yesterday following the announcement. Virgin Australia confirmed that Etihad Airways had bought a 3.96% stake and said Etihad was one of Virgin Australia’s strategic alliance partners. The airline is 26% owned by Richard Branson and 20% by Air New Zealand. Hogan ruled out any plans by the Gulf carrier to buy a stake in Virgin Australia’s rival carrier Qantas, which yesterday warned of its first annual net loss since its privatisation in 1995. “No, we are partners with Virgin Australia,” Hogan said when asked if he would be interested in the airline. Etihad began flying to Australia in 2007 and along with Virgin Australia they operate 24 flights a week between Abu Dhabi and Australia. Hogan said he expects a good second quarter for the Etihad. “The first-quarter we were on track. I’m forecasting the same for second quarter. If we have a good third quarter and see people travelling, then I’m positive we can achieve continuing profits,” he said. Etihad’s first-quarter revenues rose 28% on the back of increased passenger numbers and the expansion of its global network.