Etihad Airways is free to double its stake in Virgin Australia to 10 per cent after receiving the all clear from the federal regulator.
The Middle East carrier acquired a 4.99 per cent equity stake in Virgin Australia earlier this year.
Etihad, which has a 10-year partnership with Virgin, says the Foreign Investment Review Board (FIRB) had cleared the way for an increased investment.
Etihad Airways and Virgin Australia operate 24 flights per week between Australia and Abu Dhabi which involves codesharing, reciprocal frequent flyer benefits and joint-bidding for corporate contracts.
In a statement on Thursday, Etihad said the strategic partnership had already delivered significant revenues to each airline.
“It is expected that the equity stake in Virgin Australia will lead to further revenue generating opportunities,” the company said.
Etihad entered the Australian market five years ago and currently services Sydney, Melbourne and Brisbane. It has plans to fly to Perth in the future.
Etihad is not the only foreign entity with a large chunk of Virgin Australia shares – Sir Richard Branson’s UK-based Virgin Group has a 26 per cent stake, while Air New Zealand owns 19.9 per cent of Australia’s second-largest carrier.
Earlier this year, Qantas Airways called for regulators to take a close look at Virgin Australia’s proposed ownership restructure, where its international operations would be transferred to a separate, unlisted entity, owned by current shareholders.
Last month Qantas reportedly lobbied government and opposition politicians about Etihad’s desire to invest in Virgin, warning that the Abu Dhabi-based carrier would “cross-subsidise Virgin’s domestic business with the specific aim of weakening Qantas”.
Fat Prophets analyst Greg Fraser said the regulatory approval raised questions about whether the Dubai-headquartered Emirates Airlines would replicate the situation and take a stake in Qantas.
“Qantas will be watching to see if Etihad’s stake has any impact on domestic capacity,” Mr Fraser said.
Last month Emirates president Tim Clark confirmed the airline had reached out to Qantas Airways about a commercial partnership to expand the carrier’s network in Oceania, but he ruled out taking an equity stake in the embattled Australian airline.
Still, Mr Fraser said Etihad was most likely in better shape than most of the world’s airlines, so the tie-up would provide some degree of financial certainty to Virgin.
“In reality the threat is a bit less obvious,” Mr Fraser said.
“I don’t think it’s going to create any overnight changes.”
