Virgin Australia Airlines (Virgin Australia Holdings-VAH) (Brisbane) has announced that it has made an investment in Skywest Airlines Ltd. (Perth). The airline made the investment “in order to capitalize on opportunities in regional Australia by supporting further growth of VAH and Skywest’s regional partnership.
Should this investment and associated rights be converted to equity VAH will own approximately 10% of Skywest on a fully diluted basis.”

Virgin Australia has grown its regional operations significantly since launching its regional network with Skywest in October 2011, with the commencement of new services to Emerald, Gladstone and Port Macquarie.

The fleet of four new ATR 72 aircraft being operated by Skywest in Virgin Australia’s colors will increase to 12 by the end of the 2013 financial year.

The investment will be made by way of an A$8 million convertible facility with Skywest. The facility is convertible by VAH into ordinary shares in Skywest at a conversion price of A$0.45 per Skywest share with a maturity date of April 15, 2015 and a coupon rate of 7.5% per annum.

In addition, Skywest has agreed to grant VAH a first tranche of 4 million warrants at a grant price of A$0.05 per warrant with a conversion price of A$0.45 per warrant along with rights to participate in future share issues during the term of the facility to avoid dilution. Subject to Skywest shareholder approval and there being no objection under Australia’s foreign investment policy Skywest intends to grant an additional tranche of 2.41 million warrants to VAH on the same terms. The warrants have a maturity date of April 15, 2015. If the facility and all warrants are converted by VAH, then VAH would hold an equity stake of approximately 10% in Skywest on a fully diluted basis.

Top and Bottom Copyright Photos: Peter Gates.

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