Virgin wants a larger slice of FIFO market

VIRGIN Australia has reached an agreement to acquire Western Australia’s Skywest Airlines in order to fast-track its growth into the fly-in, fly-out and regional markets.
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Kristie Batten

Virgin is offering Skywest shareholders A45c per share, comprising 22.5c cash and half of a Virgin share for every Skywest share held.

The deal stems from a regional alliance formed between both airlines in January last year, which allowed Skywest to operate new Virgin Blue branded turbo prop aircrafts, leased from specialist leasing company Avation.

Virgin Australia chief executive officer John Borghetti said through the acquisition, it could now realise the full potential of the Skywest operation by developing a more integrated network, service and frequent flyer program.

“If approved, the transaction will enable us to fast-track our advancement in the high growth fly-in, fly-out and regional markets, increasing competition in these important segments,” Borghetti said.

Under the agreement, Skywest will become part of the Virgin brand but will continue to operate under its current air operator’s certificate, with its own CEO and management team, based in WA.

However, Virgin said it would invest in supporting the growth of Skywest to benefit jobs, business and tourism in WA and regional Australia.

Skywest executive chairman Jeff Chatfield welcomed Virgin’s proposal and said it represented a substantial premium to its recent trading price, confirming the value of the Skywest business.

“The proposal will only proceed in the absence of a superior offer,” Chatfield said.

“Skywest will be appointing a Singaporean independent expert to advise the board of the value of the proposed consideration.

“Based on our advice, it is likely that this proposal will take some months to fully play out.”

Skywest has appointed Moelis & Company to advise and assist the transaction.

The proposal is subject to approval from the Securities Industry Council of Singapore, the Australian Competition and Consumer Commission, the Australian Foreign Investment Review Board, the Singapore High Court and Skywest shareholders.

Operating for nearly 50 years, Skywest holds a strong presence in the FIFO mining market.

Earlier in the month, Skywest scooped up another contract with mining major BHP Billiton, transporting its FIFO workforce to and from the Jimblebar iron ore operation in WA’s Pilbara region.

Virgin signed its first deal with Rio Tinto late last year to service the miner’s global air travel requirements.

This article first appeared in ILN's sister publication MiningNews.net.

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