Virgin Australia Holdings Ltd on Monday said it entered an agreement to buy back...
) on Monday said it entered an agreement to buy back the 35% of its Velocity frequent flyer program that it does not already own for A$700 million from private-equity group Affinity Equity Partners.
The purchase will give Virgin greater control over a division that generates positive cashflow at a time when new CEO Paul Scurrah is undertaking a turnaround plan after the carrier last month reported its seventh consecutive annual loss. The value of loyalty schemes lies in the steady income from banks, retailers and other partners who pay up front for points and then pass them on to customers who typically do not redeem them with airlines for many months.
Ian Chitterer, a vice president at Moody’s, said the Velocity purchase was credit positive for Virgin because it would diversify earnings away from the cyclical airline sector but the final impact on its rating would depend on the funding structure.
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