Virgin strife needs national bailout, says Queensland Minister

A Queensland minister has outlined the State Government’s $200 million contribution to keeping Virgin Australia flying, saying it is contingent on the Federal Government chipping in.

QUEENSLAND minister Cameron Dick says stopping job losses and airfare hikes are key factors as to why state leaders and the Federal Government needed to chip in with a coronavirus rescue package for Virgin.

Mr Dick today moved to ramp up pressure on the Federal Government to agree to a financial lifeline for the beleaguered airline by outlining a $200 million state contribution for the carrier, contingent on multiple factors.

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Speaking to The Sunday Mail today, Mr Dick, who is Queensland’s State Development Minister, said it was not so much an “ultimatum” to Canberra, but the state could not single-handedly come to the rescue.

State Development Minister Cameron Dick says a $200 million state rescue package for Virgin is contingent on federal funding and other states and territory governments chipping in.

“It is not without risk for the state but because of the importance of Virgin to Queensland, because of it’s history, (and) I think critically because of the importance of having the two airlines for Queensland we knew we had to take a stance,” he said.

“This is a national airline weathering a national crisis and it needs a national response.

“So we don’t have the resources as a state to do it on our own.”

“If we lose competition that will be a disincentive for everyone including governments that fly a lot of people around the country and so that is very important and that’s why it is in the interests of states and territories to take those strategic investments because that will be an important thing for their budgets and bottom lines going forward..”

The $200 million commitment is heavily contingent on a range of factors, including a commitment by other state and territory governments to stump up money, as well as the Federal Government.

It comes after Virgin Australian chief executive Paul Scurrah urged the Morrison Government to help it survive the COVID-19 downturn by agreeing to a $1.4 billion loan.

Virgin Australia CEO Paul Scurrah

Mr Dick today said it was flexible on how the $200 million support could be delivered, but said it hinged on funding from other levels of government, as well as a financial contribution from Virgin shareholders and bond holders.

He said the Government had no “set view” on the scale of financial investment needed from shareholders, but given the scale of financial assistance being sought by Virgin, it expected at least some level of commitment.

“There have been views expressed by some shareholders. There’s a number of shareholders in the company, Etihad (Airways), Singapore (Airlines), two Chinese interests as well including the Virgin Group itself.

“I know there are still discussions with shareholders. Some have made it clear they are not going to invest, but our position is they need to step forward as well.”

Virgin is of strategic importance to Queensland, with about 5000 staff working from its Bowen Hills headquarters. It would have to keep its HQ in Queensland to be eligible for the state assistance.

Industry experts say that could prove a disincentive for other states to come to the table.

But Mr Dick said state counterparts needed to consider the importance of saving Australia’s two airline policy and stopping fare hikes, which can be as high as 25 per cent more on single carrier routes.

“If we get through this in 6 months or whatever the time is there aren’t going to be airlines around the world who are going to be ready to come into the Australian market. That’s the reality. We have to make some strategic decisions now,” he said.

Shadow treasurer Tim Mander yesterday was awaiting further detail of the state rescue package.

“We want full details of the bailout to ensure taxpayers are protected and a jobs and lower airfares guarantee,” he said.

The Courier-Mail today reported that the Chinese Government, through China Southern Airlines, China East Airlines and Air China, was understood to be in discussions with a view to purchasing the airline.

But aviation expert Neil Hanford, chairman of Australian-based international consultancy Strategic Aviation Solutions, today cast doubt on any genuine interest from Chinese aviation companies.

He said the airlines mentioned already had 80 per cent of the Chinese domestic and international market, and international law requiring a majority stake owned by the country in which the airline was flagged would prevent them flying internationally if they bought out Virgin.

Mr Hanford was also critical of the State Government intervention, labelling it a “distraction.”

He said the Federal Government had already made it “blatantly clear that there would be an industry package not a Virgin package” and Virgin shareholders had already refused to help.

“All of those companies have already chosen not to put one cent into the Virgin rescue,” he said.

“This is a childish school playground attempt at getting votes in October.

“(The State Government) are saying, we didn’t let Virgin go, we were prepared to put money up, but all those bad guys in Canberra and all those naughty southerns, they wouldn’t come with the money.

“What about all the airlines that have been allowed to fail in Queensland that service the isolated indigenous communities?

“At no stage did the Queensland Government ever step up to the plate.”

Tourism Minister Kate Jones today, however, seized on rumours of Chinese interest to argue for Australian Government funding.

“The most critical issue facing the tourism industry right now is saving Virgin,” she said.

“It will be so much harder for the tourism industry to rebuild if we have one airline in our country.

“I don’t think Australians want the Chinese Government to step up, they want the Australian Government to step up.

“The worst thing that can happen to the tourism industry is to go back to the dark days of one airline servicing Australia.”