Virgin Aust frequent flyer backer to exit

Virgin Australia says the fund manager that bought a stake in its frequent flyer program five years ago is looking to offload its 35 per cent interest.

The airline on Thursday said Affinity Equity Partners, which paid $336 million for the Velocity Frequent Flyer stake in August 2014, has requested “various exit options”.

Virgin Australia said the carrier remained committed to the long-term growth of Velocity, which had 9.1 million members at the end of the 2018 financial year – up from 4.5 million when the Affinity deal was announced.

Velocity had the healthiest earnings margin by far of any of Virgin Australia’s businesses over the 12 months to June 30, 2018.

But the margin still declined over the year as earnings from the program fell 22.9 per cent to $110.1 million following regulatory changes to Australia’s credit card industry.

In 2017, the Reserve Bank introduced a cap on domestic credit card interchange fees, which limited fees banks could charge to businesses to process credit card payments.

One knock-on effect was that many businesses reduced the number of frequent flyer points they offered customers.

Virgin Australia shares were worth 17 cents before the market opened on Thursday, down nearly 40 per cent during the past 18 months.

AAP

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