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Virgin Australia's private equity boss believes that it can weather the Middle East volatility.

Mike Murphy, a Bain Capital partner, is confident that Virgin Australia will be able to withstand the travel disruptions caused by Middle East tensions as well as the volatility in oil prices.

Bain, who bought Virgin for A$3.5billion ($2.3billion) including liabilities in 2020 raised A$685m when Australia's 2nd largest airline listed on the Australian Securities Exchange Tuesday.

In the initial public offering, the private equity firm reduced its stake from 70% to 39.4%.

Virgin's debut at the ASX was just hours after Qatar closed its airspace. The airline diverted two Qatar bound flights following the firing of Iranian missiles on a U.S. military base in the state.

Virgin launched Doha flights in the first half of this month, under a leasing agreement with Qatar Airways. Qatar Airways owns 23 percent of Virgin.

Murphy, speaking by phone, said that "our view on Middle East oil and Middle East issues is that we are pretty well situated geographically and strategically in terms of our domestic focus in order to be as assured as you can be in this sector."

We're fully hedged in the short-to-medium term from an oil price volatility standpoint.

Virgin announced in a filing to the stock exchange on Tuesday that it had hedged 98% its anticipated fuel consumption in Brent crude oil with a cap at $70 per barrel in the first half 2026. It hedged 86% at the same price for its fuel usage in the second half.

A recent report by the Australian Competition and Consumer Commission revealed that Virgin had a 34.4% share of the domestic flight market in March, while Qantas held 37.5%.

Murphy said that the decision to reduce Virgin's international routes under Bain ownership and focus on domestic flights had improved Virgin's profitability and balance sheet.

Murphy stated that "Long haul international was never a part of business that made money"... the strategic decisions made by the company at that time resulted in an overstretched financial statement, with very low margins.

Virgin shares closed Thursday at A$3.25, a 12% increase from the IPO of A$2.90. (1 Australian dollar = 1.5286 dollars) (Reporting and editing by David Evans; Scott Murdoch)

(source: Reuters)