Indian billionaire behind budget carrier IndiGo joins bidding race for Virgin Australia

Virgin Australia aircraft parked at Brisbane International airport. AFP

The biggest shareholder of Indian budget carrier IndiGo is considering a bid for Virgin Australia, joining a score of suitors seeking to capitalise on Asia’s first airline casualty from the coronavirus pandemic.

Rahul Bhatia, who owns the Indigo holding through InterGlobe Enterprises, is evaluating data of the Australian airline founded by Richard Branson and is finalising a strategy, a source said. No decision has been made yet.

IndiGo denied an earlier report it plans to bid for Virgin Australia. The proposal is being prepared by InterGlobe Enterprises, and not by IndiGo, the source said.

Virgin Australia has attracted at least 20 potential buyers as its administrator, Deloitte, races to sell the airline within two months of its collapse. Deloitte is seeking indicative bids by Friday and binding offers in June, targeting a deal by the end of that month.

Virgin Australia collapsed owing A$6.84 billion (Dh16.5bn) to more than 10,000 creditors, overwhelmed by a near-halt in revenue as the coronavirus shut down travel.

Virgin Australia reported seven consecutive annual losses before it folded. According to the Australian Financial Review, the Indian proposal aims to relaunch the airline in its original form as a low-cost carrier to return it to profit.

At the time of its first flight from Brisbane to Sydney in 2000, Virgin had just two aircraft and one route. Under chief executive John Borghetti, who took over in 2010, the airline transformed itself into a full-service carrier, selling business-class seats across its domestic network. Mr Borghetti went head-to head against his old employer, Qantas Airways.

The huge investment required for the battle and a capacity war with Qantas, spawned almost endless losses. Mr Borghetti’s successor Paul Scurrah, who took the helm in 2019, was in the middle of a turnaround plan to reduce debt and costs when the coronavirus emerged and swamped any hopes of a recovery.

A plan to operate Virgin as a low-cost carrier may run into opposition in Australia. Such a strategy would hand almost all the corporate and business-class market to Qantas, which itself owns budget carrier Jetstar. The head of Australia’s competition watchdog, Rod Sims, has already called for Virgin to return as a full-service carrier. The government also said it wants the country to have two competing airlines.

Meanwhile, Virgin Group of Mr Branson on Monday said it may sell up to 25 million shares of space tourism company Virgin Galactic Holdings to raise funds amid the Covid-19 pandemic.

The company said it intends to use the proceeds to support its portfolio of global leisure, holiday and travel businesses that have been affected by the impact of the coronavirus, according to a Reuters report.

Shares of Virgin Galactic, which have gained 69 per cent this year, slid after the announcement. Based on Friday's closing price, the offering would raise as much as $504.5 million (Dh1.85bn).

The company, which aims to offer the first commercial space flight later this year, said in April it would keep running as a critical infrastructure business during the pandemic.