As Singapore Airlines emerges with the biggest stake in Virgin Australia, the challenge for Virgin boss John Borghetti will be to manage competing interests of the very big shareholders now sitting behind his airline.
After paying $122 million for some of Richard Branson's holdings in Virgin, Singapore, one of the world's leading airlines, will be on 19.9 per cent if approved by regulators. The transaction at 48¢ a share values the Virgin Group at $1.2 billion. By comparison, rival Qantas is capitalised at $4.1 billion.
If approved, Singapore will sit ahead of Air New Zealand, which has about 19 per cent of Virgin. Abu Dhabi's Etihad is at 8 per cent and Richard Branson's Virgin Group is on 13 per cent. Prior to the off-market deal with Branson, Singapore held a 10 per cent stake in Virgin.
For some, Singapore's move to cement its relationship with Virgin should not be surprising. The transaction came a day after regulators gave Virgin Australia a green light to take a majority stake in discount carrier Tiger Australia. Remember, Tiger's ultimate parent company is also part-owned by Singapore Airlines.
Meanwhile, Etihad boss James Hogan has made no secret of the fact that he wanted to increase his holding in Virgin. Given Virgin shares are tightly held, it would be tough to soak up a large slab of stock on market. So the only logical path would have been Branson, and Singapore has moved in first.
While Australia is a distant market, it remains important for both Singapore and Etihad. Both need a feeder airline as well as a strong domestic partner here.
Meanwhile, Australia is the biggest market for Air New Zealand, so a partnership with Virgin remains critical. Some observers expect Air New Zealand may also increase its stake in Virgin right up to the takeover threshold of 19.9 per cent to ensure the New Zealand player remains an influential force at Virgin.
On top of juggling his shareholders, Borghetti has his work cut out over the next 18 months. He faces the challenge of integrating Tiger as well the recent move on West Australian airline Skywest.
While Qantas has recently been invigorated by its alliance with Emirates, the latest deal can only be bad news. As long as Borghetti can keep his big shareholders in line, Virgin will be a potent force challenger for its key rival.