Qatar Airways will buy a 25% stake in Virgin Australia from U.S. private equity firm Bain Capital, posing a tougher contest for Qantas Airways (QAN.AX), opens new tab that has dominated Australian routes and pushed back against giving access to the Middle Eastern carrier.
The purchase of the minority stake for an undisclosed amount will need to be signed off by Australia's government, which denied Qatar Airways' requests last year to fly additional services into Sydney, Melbourne, Brisbane and Perth.
"This partnership brings the missing piece to Virgin Australia's longer-term strategy," Virgin Australia CEO Jayne Hrdlicka said in a statement.
"It means that we've got an important shareholder who has a scale that we don't have, who has the expertise that we don't have, that can help us compete better domestically by giving us access to that scale," Hrdlicka said later in an interview with ABC television on Tuesday.
Shares in Qantas fell as much as 4.3% by 0239 GMT and were among the worst performers on the benchmark S&P/ASX 200 index.
The stake sale also serves as a cornerstone investment ahead of an anticipated return of Virgin Australia into public ownership, the companies said.
Bain said last year it would explore an IPO of Virgin Australia, which it bought for A$3.5 billion ($2.42 billion) including liabilities after it was placed in voluntary administration in 2020.
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