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Just two weeks after offloading its New Zealand rail assets to the Government, Australian transport company Toll Holdings has announced plans to spin off its stake in Virgin Blue, Australia's second-biggest airline.
The move restores founder Richard Branson as the carrier's largest shareholder.
Toll, Australia's largest freight hauler, will distribute most of its 62 per cent stake in Virgin Blue to shareholders, the Melbourne-based company said yesterday. Branson's Virgin Group, which started the carrier, will retain its 25.5 per cent holding in the A$531 million ($514 million) airline.
Virgin Blue operates the New Zealand budget airline Pacific Blue.
The spinoff comes three months after Toll scrapped a planned sale of the stake, which has slumped 66 per cent since being acquired in the 2006 takeover of Patrick Corp. Virgin Blue slashed profit forecasts and cut routes after jet fuel prices doubled in the past 12 months.
Global airlines may report their worst year since 2003 as fuel costs surge and economies slow.
The plan "leaves Toll's books clean for investors", said Angus Gluskie, who helps oversee the equivalent of A$500 million at White Funds Management in Sydney, including Virgin Blue and Toll shares. Toll stakeholders will get one Virgin Blue share for every share held, the Brisbane-based carrier said in a statement.
Virgin Blue's underlying profit fell as much as 39 per cent to A$132 million in the year ended June 30, 2008, matching its April forecast, it said. Fuel accounted for about 35 per cent of the costs.
The company controls about 35 per cent of Australia's aviation market, trailing Qantas. It operates 55 aircraft completing 2200 flights a week and employs about 4200 people.
Toll, which operates logistics services across more than 45 Asian countries, offered to sell control of Virgin Blue to Branson in 2005 as part of its A$6 billion, eight-month takeover battle for port and rail owner Patrick.
Virgin Blue began flying in Australia in August 2000 before Branson sold a 50 per cent stake in the carrier to Patrick in 2002. The airline was valued at A$2.3 billion when it listed on the Australian stock exchange in December 2003.
"Virgin Group remains a long-term committed cornerstone shareholder in Virgin Blue and has a high degree of confidence in Virgin Blue's business model and future," Branson said.
The greater free float may tempt investors to consider an offer for the carrier, said Gluskie. A group led by Macquarie Bank bid for Qantas in 2006.
Airlines worldwide may report combined losses of as much as $6.1 billion in 2008, the International Air Transport Association, whose members account for 93 per cent of international traffic, said last month. That would be the biggest loss since 2003.
- STAFF REPORTERS, BLOOMBERG
