VIRGIN Australia is expecting to save $20 million a year through its acquisition of the remainder of the Velocity Frequent Flyer Program, with key benefits of the deal including improving engagement with the scheme, and the “increased use of direct channel distribution”.
This morning VA issued a prospectus as part of a $150 million local capital raising, in which ASX-listed notes are being offered with a five-year term and an expected 8% annual return.
The money will be used, along with a US$425 million offer in the USA (TD 25 Oct) to help fund the $700 million buyout of the Velocity stake currently held by Affinity Equity Partners.
The deal’s documentation notes that currently 70% of Velocity points are earned with partners other than Virgin Australia, with the takeover giving VA the ability to retain 100% of the cash flows and equity upside from the “cash-generative loyalty program”.
Chairman Elizabeth Bryan noted that VA holds 37.7% of the Australian domestic aviation market, with management having a “renewed focus on enhancing Virgin Australia’s financial performance”.
The prospectus confirms that VA’s five largest shareholders – Etihad, Singapore Ailrines, HNA Group, Nanshan Capital and the Virgin Group – collectively hold 90.9% of the airline’s shares.
The note offer will open on 05 Nov and close three weeks later.
Any surplus funds from the capital raising will be used for “general corporate purposes”.
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Source: traveldaily