Virgin Australia has confirmed it will buy back the remaining 35 per cent of its Velocity frequent flyer program from private equity group Affinity Equity Partners.
The airline on Monday announced it had entered into a term sheet with Affinity and it expected the $700 million transaction to be completed before the end of 2019.
Virgin Australia said the acquisition was subject to conditions including the finalisation and execution of long form documentation, funding and receiving approval from Australia's Foreign Investment Review Board.
Ratings agency Standard & Poor's said it thought the airline had "sufficient balance sheet capacity" to retake control of Velocity but if the move was debt-funded, it may reduce the company's financial flexibility.
"This could leave the group with limited capacity to withstand any intensification of competition, adverse foreign exchange or fuel price movements, or the realisation of execution risks associated with its restructuring program," S&P Global Ratings said.
Virgin Australia recorded its seventh consecutive annual loss in August and said it would cut 750 corporate and head office jobs as part of a restructure aimed at saving $75 million by the end of the 2020 financial year.
Shares in Virgin Australia were flat at 16 cents at 1148 AEST, down 29 per cent from 22.5 cents a year ago.