Virgin Australia's frequent-flyer partner seeks to exit stake

Virgin Australia Holdings said Thursday that Affinity Equity Partners is seeking to exit its 35% minority stake in the carrier’s Velocity frequent flyer program, five years after its A$335m purchase. Australia’s second-largest airline said that it intended to stay a majority investor in Velocity, which competes with the larger Qantas frequent flyer program for Australian customers. The potential Affinity exit is a fresh test of investor demand for loyalty programs after airlines Air Canada and Brazil’s Gol Linhas Aéreas Inteligentes, which had spun off their frequent flyer programs, last year bought out minority shareholders to regain full control. It also comes as Virgin is re-examining its broader strategy under the leadership of new CEO Paul Scurrah, who took over from CEO John Borghetti in March. Virgin said Affinity, a private equity firm, had requested it explore various options for the stake sale. No time-frame or terms have been set, Virgin added in a statement to the stock exchange. In a bond prospectus issued in 2014, Virgin said there was a potential for Affinity to exit via a float or trade sale within three years of the purchase date. Virgin has a first right of offer in relation to Affinity’s stake in certain circumstances and has the right to participate in other exit mechanisms available to Affinity, according to the prospectus.<br/>