Virgin Australia Group is all set to buy back Affinity Partners’ minority stake in Velocity Frequent Flyer, following months of speculation.
In a statement to shareholders issued this morning, Virgin said it had entered into a term sheet with Affinity to buy back its 35 per cent investment of the frequent flyer program for $700 million.
According to Virgin, the transaction is expected to be completed before the end of year, and is subject to certain conditions, including the finalisation and execution of long-form documentation, funding and approval from the Foreign Investment Review Board.
The move comes after months of speculation around Affinity’s stake in Velocity, with Virgin finally confirming in July that its co-investor wanted out after purchasing its stake for $335 million in 2014.
It’s also a sign of just how valuable the frequent flyer program is to Virgin, having delivered earnings growth of 13 per cent to $132.4 million in an otherwise dour FY19 for the group, which led to the announcement of 750 job cuts.
The buyout deal with Affinity values the business at $2 billion, according to multiple media reports.
Velocity Frequent Flyer recently announced a partnership with rideshare player Ola to combat Qantas’ tie-up with Uber, but also lost BP to Qantas.
When asked what the group plans to do with Velocity if it takes full control, a Virgin Australia spokesperson told Travel Weekly: “It’s important to note that this transaction is not yet finalised, and it continues to be business as usual for the group and Velocity.
“We are currently negotiating the terms of the buy-back and will provide a further update when available.”
