Air New Zealand (NZ, Auckland International) has moved to quash a flurry of speculation that it has been in merger talks with Virgin Australia (VA, Brisbane International). In a statement released to both the Australian and New Zealand stock exchanges on Friday, September 16, Air New Zealand chairwoman Therese Walsh said the airline had not been approached and was not in discussions with any parties, regarding a potential merger transaction.

Virgin Australia chief executive Jayne Hrdlicka fueled the speculation on Thursday when she failed to categorically deny talks were underway while speaking to reporters at the Australian Investment Conference at the Gold Coast. The Australian newspaper also reported the airline was talking to investment banks Goldman Sachs and Jarden about a possible deal.

Virgin Australia is owned by Boston-based private equity firm Bain Capital while the New Zealand government retains a 52% stake in their national airline. Both airlines are firmly on the ascendancy after Covid-19. Virgin Australia went into voluntary administration in April 2020 before being acquired by Bain. Since then, recurring rumors of an IPO have dogged the airline.

In addition to becoming a powerful competitor to Qantas (QF, Sydney Kingsford Smith), any merger with Air New Zealand would have potentially provided a backdoor avenue to relisting and allowed Bain to start to wind down their investment in Virgin Australia. However, with that door seemingly shut, a 2023 IPO now looks increasingly likely.

Virgin Australia recently posted an AUD567.9 million Australian dollar loss (USD381.9 million) loss for the 12 months to June 30, 2022. But Hrdlicka also said last week that the airline was on track to make a profit this financial year. Net finance costs at the airline are 40% less than before going into administration and its underlying performance is rebounding positively.

Meanwhile, Virgin Australia is also said to be eyeing acquiring Rex - Regional Express (ZL, Wagga Wagga), an Australian regional carrier that mostly operates Saab 340As on flights to provincial towns and cities in Australia but also operates some mainline B737-800 flights. Rex, which is majority owned by Singaporean interests, said it doesn't comment on market speculation or rumours.

"It is up to Virgin Australia to comment on this matter," said the airline in a stock market statement on Friday