Etihad Airways will be permitted to take a 10% stake in Virgin Australia, following approval by the Australian Government for the Abu Dhabi flag-carrier to double its existing 4.99% slice of Virgin.
The equity stake will be capped at a maximum of 10% per cent stake by the Foreign Investment Review Board (FIRB).
Last month Etihad paid an estimated A$37.5m for an initial 3.96% slice in Virgin Australia’s domestic operations, and even then Etihad CEO James Hogan admitted that "At a point in time, we would like to take it to a minimum of 10 percent, if we get the necessary approvals."
Air New Zealand has a 19.99% stake in Virgin Australia, putting it only second to Sir Richard Branson’s 26% shareholding.
The Etihad and Air New Zealand stakes were made possible after Virgin Australia separated its international and domestic operations, a move aimed at encouraging precisely this type of foreign investment.
Hogan says the stake is in line with Etihad’s strategy to invest in airlines it believed were of value to it from a network perspective.
“We’re keen to have a strong minority stake that strengthens our partnership with Virgin Australia” he told The Australian last month.
“We’re committed to the partnership. We think John Borghetti has done a great job. He’s repositioned the airline strongly, our partnership is driving considerable benefits for both of us on the kangaroo route and this just ties us in.”
Etihad's partnership with Virgin Australia already includes codesharing flights and reciprocal 'earn and burn' on their respective frequent flier programs, with the airlines also planning to open shared international lounges at Sydney and Melbourne International Airports.
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About David Flynn
David Flynn is the editor of Australian Business Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.