Why Qantas’ $20 domestic airfare offers is another jab at Virgin

If you’re thinking Qantas’ latest offer seems too good to be true, you’re right. Their cheap flights are just another ploy to dominate aviation and keep Virgin on its knees, writes the TWU’s Michael Kaine.

A $20 return Qantas flight from Sydney to Melbourne sounds attractive. Unfortunately, Qantas’ intention to dump thousands of cheap tickets on the market is not motivated by generosity.

It’s to keep Virgin on its knees and establish overwhelming dominance over Australian aviation.

Qantas’ predatory pricing is a strategy to control the lucrative Sydney-Melbourne route and prevent Virgin returning to any form of health.

This is why Qantas remortgaged its planes to build up a $1.6 billion war chest. This will allow Qantas to fly at a loss while a rebirthed Virgin is unable to compete.

Ultimately, this scenario would be a disaster for the travelling public.

Cash-strapped Virgin Australia collapsed on April 21, making it the largest carrier yet to buckle under the strain of the coronavirus pandemic, which has ravaged the global airline industry. Picture: Patrick Hamilton / AFP

A weaker Virgin won’t be able to invest in capacity. It won’t be able to offer many, if any flights, to lower margin destinations like Hobart, Darwin, or Cairns. Resort towns like Port Douglas would become one airline towns, leaving the whole local economy vulnerable to fare hikes that will mean fewer tourists.

The Morrison Government can and must act to prevent this Qantas stranglehold. Indeed, after deliberately (and justifiably) shutting down the aviation industry to prevent coronavirus, it has a moral obligation to return the industry to its pre-crisis form.

Virgin is currently in voluntary administration with various groups sizing up a bid.

We could improve this voluntary administration process if the federal government declared its intention to partner with a new owner with a public ownership stake. It could leave open the option of taking a similar stake in Qantas, and ancillary aviation providers such as Dnata.

Qantas Chief Executive Alan Joyce. Picture: Lisa Maree Williams/Getty Images

This would help the industry return to a stable and sustainable footing.

Unfortunately, the Morrison Government has so far been reluctant to declare its hand on this issue, instead insisting it wants a “market-based” solution. If it continues to insist on this approach, there is a real risk of Virgin being torn apart by private equity hyenas, focused on cutting costs, slashing wages, and sweating assets.

Treasurer Josh Frydenberg is aware of these dynamics. That’s probably why he has tapped former Macquarie Bank tsar Nicholas Moore to be his so-called “envoy”, liaising with the administrators on the Federal Government’s behalf. You don’t bring in one of the world’s most successful investment bankers and deal makers to be a passive observer.

So it’s time to give Mr Moore a chequebook and empower him to strike a deal on behalf of the people of Australia, through an equity stake in a recapitalised Virgin Australia. This is an eminently sensible role for the Federal Government to play, and Mr Moore is ideally qualified to lead these negotiations.

Transport Workers Union National Secretary Michael Kaine speaks with Virgin Australia employees at Sydney Airport. Picture: AAP Image/Dan Himbrechts

The Virgin Australia administration process would proceed much more smoothly if the Federal Government put this clearly on the table. It would attract a better calibre of investor and shoo off the more cynical vultures.

Having a viable and sustainable second airline, that services the entire country, is a matter of national importance.

Our vast island continent needs a healthy, well-capitalised second airline.

From the TWU’s perspective, the jobs and livelihoods of our members at Virgin are on the line. We want to see as many of our members kept in work as possible.

So let’s lay down clear markers around the social obligations we expect from partial public ownership of Virgin and explicitly build that into the administration process.

Michael Kaine is the Transport Workers’ Union national secretary.