Virgin Australia has taken a ten percent stake in Australian regional carrier Skywest as it seeks to bolster its presence in the country's regional market.
The move comes shortly after authorities granted approval for an alliance between the two airlines. Virgin Australia Chief Financial Officer Sankar Narayan said: “This investment highlights our belief in the growth potential of the Australian regional market and strengthens our partnership with Skywest.
“We have grown our regional operations significantly since launching our regional network with Skywest in October 2011, with the commencement of new services to Emerald, Gladstone and Port Macquarie. These services have been highly popular with the flying public and are already among our best performing regional routes.
“The fleet of four new ATR aircraft that we are using to operate these services will increase to 12 by the end of the 2013 financial year, and there is plenty of opportunity to further expand our regional footprint.
“We have also recently received draft final approval from the ACCC [competition regulator] to provide an integrated offering with Skywest to corporate customers so that we can cater to increased demand from the resource industry. The investment announced today will further cement this relationship”, said Narayan said.
The investment will be made by way of an A$8 million (US$7.9 million) convertible facility with Skywest. The facility is convertible by Virgin Australia into ordinary shares in Skywest at a conversion price of A$0.45 per Skywest share with a maturity date of 15 April 2015 and a coupon rate of 7.5% per annum.