Chinese airlines in talks to buy embattled Virgin Australia carrier

Chinese Government-owned airlines are in last-minute talks about a possible takeover of Virgin, in what may be the only way to prevent the carrier’s ‘catastrophic’ collapse. It comes as the Queensland Government ignites a $200m rescue bid.

CHINESE Government-owned airlines are considering an offer to buy the embattled Virgin Australia Group in last-minute takeover talks that could prevent the carrier’s ‘catastrophic’ collapse.

It comes as the Queensland Government moves to ignite a rescue bid, offering $200 million towards a bailout in the belief it will entice other states to come forward to back the nation’s second airline.

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Well-placed sources have told The Courier-Mail the Government, through China Southern Airlines, China East Airlines and Air China, is understood to be in discussions about purchasing the Queensland-based carrier, but no formal offer has been lodged.

An approach by the Chinese carriers could vindicate the Morrison Government’s call for Virgin Australia to find a market-led solution to its cash problems instead of relying on a “blank cheque” from taxpayers. 

China Southern Airlines’ grounded Boeing 737 MAX aircraft. (File photo by GREG BAKER / AFP)

A spokeswoman for Virgin Australia declined to comment. 

Meanwhile, the Palaszczuk Government flagged a $200m rescue bid — offered on the condition Virgin maintains its Queensland headquarters where 5500 people are employed — with State Development Minister Cameron Dick challenging the federal government to step up and back Virgin and reverse its refusal to provide an assistance package.

Mr Dick said the country needed two airlines and “all governments needed to work together to ensure that remained the case”.

“Queensland has given Australia both our national airlines – we won’t let them go, or let thousands of families watch their jobs go, without a fight,” he said.

“The Queensland government is ready to do its bit to support, offering $200m towards a national support package to help get Virgin get back in the skies.

Premier Annastacia Palaszczuk’s government is considering a rescue bid. Pic Annette Dew

“But we can’t do it alone, and nor should we, because all parts of Australia benefit from two national airlines.

“We need the Australian Government to lead a national effort to keep our two great airlines flying.

“We also want to keep the air fair. We know that it can cost up to 25 per cent more to fly on single carrier routes, and we want to avoid that at all costs, when we emerge from this crisis.

“We are prepared to contribute financially to a national bailout but only if the federal government steps up, the headquarters remain in Queensland, Virgin restructures its debt and shareholders and bond-holders do their bit.”

A senior Queensland government source told The Australian that if the federal government let Virgin go into administration, the state government would still be prepared to invest $200m to support a new operator, providing it was headquartered in Queensland.

“Virgin is one of the Queensland family jewels — we will roll out the bazookas to save them,” the source said.

The foreign-owned Virgin Australia Group wants the Federal Government to fork out $1.4 billion to save it from collapse.

It is understood Cabinet is split over how – or whether – they should save the airline and fear that if taxpayers step in, it could put off other investors.

The joint approach from two Chinese carriers would likely require approval from the Foreign Investment Review Board and, if approved, could prevent Virgin Australia from collapsing into voluntary administration. 

It is thought millions of Velocity Points and flight credits owned by Australians would be lost if the company was put under administration. 

Pressure had mounted on the Palaszczuk Government to offer financial support to stop it from moving its corporate head office and Velocity Frequent Flyer businesses to Melbourne.

Grounded Virgin Australia aircraft are seen parked at Brisbane Airport. (AAP Image/Darren England)

Queensland Senator Matt Canavan declared it would it would be a “stain on the legacy of the Palaszczuk Government if it presided over Virgin going to Victoria” – but Ms Palaszczuk said the state government was continuing talks with the company and the federal government.

On Wednesday Virgin Australia Group managing director Paul Scurrah refused to speculate on voluntary administration or whether the company would have enough cash to pay entitlements. 

Private frustration was building within the Government this week over what it believed were “strong arm” tactics and bluffing by the airline.

Virgin told the ASX on March 13 it “has a cash position in excess of $1 billion, with no significant debt maturities until October 2021 and no new aircraft deliveries until July 2021”.

Singapore Airlines, Etihad, Chinese groups Nanshan and HNA, and Sir Richard Branson’s Virgin Group have stakes in Virgin Australia. 

Virgin on Thursday announced a further seven-day trading halt for its shares to continue talks on financial aid and restructuring alternatives to help it weather the crisis, but it didn’t identify who the talks are with.

The Federal Opposition yesterday stood in unity with Virgin Australia in calling on the government to provide financial support.

Labor Senator for Queensland Murray Wattt declared it was “an issue of national interest” to keep Virgin Australia afloat, particularly as the nation recovers from COVID-19.

Senator Watt said the government should take an equity stake in the airline and ensure it is first in the queue of creditors to be repaid.

Senator Watt said Virgin was a “proud Queensland company” that was essential to the state’s tourism.

“Maintaining two airlines is critical for a functioning tourism industry and jobs,” he said.

Originally published as Chinese airlines in talks to buy embattled Virgin Australia carrier