-
Virgin Blue airline - Source: ONE News -
Related
Virgin Blue Holdings Ltd is seeking to raise $231 million in fresh capital and forecast a record loss amid the toughest operating environment in its history
The carrier also said its chief executive and co-founder Brett Godfrey would leave the company in 2010 - a decade after launching the airline.
Virgin Blue said the downturn in demand for travel and stiff competition would result in a net loss of between $AU160 million and $AU165 million for the year to June 30.
This compared to a net profit of $AU98 million in the prior financial year.
Virgin Blue said it was confident that it would be able to break even this financial year, with a positive group cash flow.
But it said the key drivers of the business - capacity, demand and fuel - remain volatile.
Virgin Blue's long-haul offshoot V Australia was expected to cost the airline $AU90 million to $AU100 million in start-up costs and costs related to foreign exchange for 2008/09.
Virgin Blue's short haul operations were expected to post a net profit of between $AU25 million and $AU30 million for 2008/09, helped by capacity reductions and staff cuts.
After weeks of media speculation Virgin Blue said on Monday it was undertaking a $AU231.4 million fully underwritten equity raising.
On July 13 Virgin Blue denied media reports that it was seeking to raise as much as $AU400 million but said it "assesses capital management initiatives as appropriate".
The equity raising announced on Monday will comprise an institutional placement of shares worth $AU21 million and a one-for-one non-renounceable pro-rata entitlement offer seeking $AU210.4 million.
The offering has been priced at 20 cents per share, a 31% discount to Virgin Blue's last traded price of 29 cents before the airline entered into a trading halt.
Sir Richard Branson's Virgin Group said it would participate in the capital raising by subscribing for 304.9 million shares.
Virgin Group's stake would increase to 30.2%, from 25.5%, if there are no subscriptions under the retail entitlement offer.
"The objective of the equity raising is to do nothing more than strengthen the balance sheet and provide us with some further liquidity for when the market does turn," Godfrey said at a press conference in Sydney on Monday.
"We are just being prudent, in the light of challenging conditions facing the airline industry."
Richard Branson said the Virgin Group remained committed to and very proud of Virgin Blue.
"Whilst the aviation world faces some tough market conditions, we have faith that Virgin Blue is well placed to meet the challenge with its strong brand and market position," Richard Branson said in a statement.
IG Markets analyst Ben Potter said the past 18 months had been challenging for global aviation.
"It's always prudent to raise capital to maintain the integrity and flexibility of their balance sheet, especially during these unprecedented times for global airlines," Potter said.
"It's certainly very encouraging to see Virgin Group participating in the offer."
