Qantas rails against $1.4b Virgin bailout
Qantas has signalled it would expect $4.2 billion in aid if Virgin Australia were granted a $1.4 billion lifeline. Here’s why CEO Alan Joyce is keen to avoid his competitor getting bailed out.
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Qantas Airways has ramped up its fight against a bailout of Virgin Australia, signalling it would expect $4.2 billion in aid if its smaller rival were granted a $1.4 billion lifeline.
The latest “level playing field” warning from Qantas comes after Virgin confirmed it was seeking $1.4 billion in rescue funding from the federal government.
Virgin wants an emergency loan that would be converted to an ownership stake in the loss-making airline if it could not be repaid within three years.
The Australian Securities Exchange halted trade in the airline’s shares yesterday and Virgin then confirmed if had sought a government bailout.
“It is a preliminary proposal and remains subject to the approval by the (board) and the Australian government and may or may not include conversion to equity in certain circumstances,” chief executive Paul Scurrah said.
Virgin’s market capitalisation has fallen to about $800 million, meaning that if it held at that level, the government could hypothetically become the majority shareholder if the proposed loan were converted to equity.
Mr Scurrah said Virgin and other airlines had already taken a range of measures to respond to the financial impact of the coronavirus pandemic.
“However support will be necessary for the industry if this crisis continues indefinitely, to protect jobs and ensure Australia retains a strong, competitive aviation and tourism sector once this crisis is over,” Mr Scurrah said.
Airlines have axed flights and stood down tens of thousands of workers in Australia as travel grinds almost to a halt.
Qantas has become increasingly agitated over the possibility its key competitor could receive a major funding lifeline from the government.
It has told the government it is confident it can ride out the global shutdown of the travel sector without a direct bailout but it expects to receive assistance on a ratio comparable with any granted to Virgin.
That would amount to a $4.2 billion loan for Qantas given it is three times the size of Virgin in terms of revenue and employees.
Qantas chief Alan Joyce has previously warned against specific assistance for Virgin, saying the government should “not look after the badly-managed companies which have been badly managed for 10 years”.
“The government can’t pick winners and losers … whatever aid it’s giving to one company it must give to everyone in the sector,” Mr Joyce said earlier this month.
Federal Finance Minister Mathias Cormann yesterday said the government was not planning on taking a stake in Virgin, but added it was committed to ensuring there was more than one airline operating in Australia.
“It’s not our plan to take a stake in an airline,” Mr Cormann told ABC radio.
“But let me also say that on the other side of all of this, of course, we are committed to ensuring that through our policy settings and the like that on the other side, that we have two competitive airlines and that we’ve got an aviation sector with two major airlines competing with each other.”
Australia has always had at least two major domestic airlines operating since the 1930s, when Ansett was founded.
The government has already waived $715 million in charges for domestic airlines as part of its economic response to COVID-19.
Separately, Air New Zealand has announced it will cut 3500 jobs.