Bain Capital Considers Virgin Australia IPO as Travel Demand Rebounds

The private-equity firm acquired Virgin Australia in 2020 after the airline collapsed into insolvency after the Covid-19 pandemic grounded flights worldwide. Australia closed its borders to noncitizens for nearly two years, while its states and territories adopted different strategies when policing their internal borders, in some cases setting new rules for passengers midflight.

Before its acquisition by Boston-based Bain Capital for $2.45 billion, Virgin Australia was listed on Australia’s main stock exchange for 16 years. It competes with

Qantas Airways Ltd.

BLOOD 1.39%

on domestic routes and offers international flights to destinations like Bali, Indonesia, and Queenstown, New Zealand.

Last year, the carrier established a partnership with

United Airlines Holdings Inc.

and has been bolstering its international alliances, including expanding a decade-old agreement with

Singapore Airlines Ltd.

It also unveiled a new daily route between Cairns—a city in northeastern Australia—and Tokyo, which will commence in June.

“The business is in great shape,” said Mike Murphy, a Sydney-based partner of Bain Capital. “In the coming months we will consider how best to position Virgin Australia for continued growth and long-term prosperity.”

Bain Capital intends to retain a significant shareholding in the airline should it pursue an IPO, he said.

“Bain Capital has made a long-term commitment to support Virgin Australia’s growth and sustainability,” said Mr. Murphy.

No decisions have been made about when or whether a relisting of the airline will occur, Bain Capital said.

Virgin Australia sought bankruptcy protection in April 2020 as the pandemic upended global travel. It had furloughed the majority of its 10,000 workers in an effort to stave off insolvency and explored seeking a bailout from the Australian government. Lawmakers refused to prop the company up, citing its foreign ownershipwhich included Etihad Airways, Singapore Airlines and Chinese conglomerate HNA Group Co.

The commercial aviation industry has faced a difficult recovery from the pandemic, even as many countries have relaxed border restrictions. Australia reopened its border to tourists in February 2022.

Airlines worldwide have grappled with labor shortages and absenteeism among staff when they fall sick, leading to flight delayscancellations and lost luggage. Fuel costs surged after Russia’s invasion of Ukraine drove up global energy prices.

While many carriers have yet to return to full capacity, there are signs that conditions are improving.

American Airlines Group

Inc. last week raised its revenue guidance for the recently ended quarter as demand for air travel remained strong through the holiday season, even as travelers contended with higher fares.

In November, Qantas raised its half-year profit guidance and said its net debt should be significantly lower than expected. The carrier said people appeared to be making travel a priority and that limits on international capacity seemed to be spurring a rise in domestic vacations.

Last week, a new Australian budget carrier, Bonza Aviation Pty Ltd., was granted regulatory approval to begin passenger flights.

Bain Capital’s Mr. Murphy said Virgin Australia, led by Chief Executive

Jayne Hrdlicka,

had achieved an impressive transformation. Before the pandemic, the airline had struggled to turn a profit on its international routes, although its domestic operations and loyalty program were moneymakers.

“Bain Capital will ensure these preliminary deliberations are not a distraction for Virgin Australia management, who can remain 100% focused on their roles,” Mr. Murphy said.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com