Qantas’ nightmare as airline sides with Virgin

Qantas previously lobbied the government to block this major airline from expanding in Australia – but things have taken a surprising turn.

Qatar Airways’ move to take a 25 per cent stake in Virgin Australia will force Qantas to “defend” its market share, an Aussie travel industry leaders says.

The deal, which comes after months of negotiation between the Aussie airline, its US owner Bain Capital and the Doha-based carrier, will ultimately mean increased competition in Australian aviation, such as lower airfares and greater choice.

According to Virgin, the move will look to deepen and strengthen the existing codeshare deal between Virgin and Qatar, recently named the world’s best airline, and has the potential to fast-track Virgin’s international network.

Qatar Airways intends to take a 25 per cent stake in Virgin Australia.

Currently, Virgin’s international routes include Japan, Bali, New Zealand, Fiji, Vanuatu and Samoa.

However, if the 25 per cent stake is approved by the Foreign Investment Review Board and ACCC, it will see Virgin launch flights from Brisbane, Melbourne, Perth and Sydney to Doha, in the Middle East.

Virgin’s domestic services will also be improved by reportedly allowing the airline to lease Qatar’s twin-aisle B777s for routes in Australia.

Virgin currently carries 31 per cent of Australia’s domestic traffic, with Qantas/Jetstar taking 62 per cent.

What the proposed deal means for Aussies

Flight Centre Travel Group managing director of Australia, James Kavanagh, said the proposed deal will benefit Aussies in a positive way.

“An investment like this is only going to make Virgin Australia stronger and more competitive which is good for the entire industry following a period of uncertainty,” Mr Kavanagh told news.com.au.

He said it would see both airlines realise access to greater efficiencies and synergies.

“(And) we expect this to benefit the end consumer and create interesting new options for travellers taking off domestically and internationally,” he added.

The deal would allow flights from Australia’s four largest cities to Doha, under a plane and crew lease agreement.

Mr Kavanagh said ultimately it should mean more routes, heightened competition and better prices for Aussies.

“We believe this is further great news for travellers at a time when international airfare prices are falling significantly in Australia, capacity is increasing and airlines are innovating by introducing more direct services, like Qantas offering Perth to London,” he said.

‘More flights means more competition’

Executive Traveller editor-in-chief David Flynn said under the alliance, Virgin will be able to lease any of Qatar Airways’ twin-aisle jets to fly between Australia and Doha.

“Those are likely to be the big Boeing 777s, which Virgin used to fly to Los Angeles, but could also be the more modern Airbus A350,” Mr Flynn told news.com.au.

He said more flights means more competition, which in turn brings airfares down as there are more “seats in the sky” for travellers to choose between.

“On top of that, you’d have to expect Qatar and Virgin will unleash massive sales to kickstart this new stage of their partnership,” he said.

Virgin Australia CEO Jayne Hrdlicka said the partnership brings the ‘missing piece’ to Virgin’s longer-term strategy and is a huge vote of confidence in Australian aviation. Picture: Brendan Radke

‘Force Qantas to defend its market share’

Mr Flynn said that while there’s no immediate impact on Virgin’s biggest competitor – Qantas, “there’s no doubt this sharper competition will force Qantas to defend its market share”.

“That could some in the form of discounted airfares but also we could see more of the passenger-facing investment that CEO Vanessa Hudson has already been championing in upgrading in-flight meals, lounges and so on,” he said.

Last year, Qatar was blocked by the Albanese government from running extra flights into Australia, despite other international carriers such as Turkish Airlines and Sri Lankan Airlines being granted more landing slots.

Qantas had previously lobbied the federal government to block Qatar Airways’ application with former Qantas boss Alan Joyce arguing that allowing extra flights by Qatar would distort the market.

The decision was extraordinarily controversial with the government facing criticism for stifling competition in the aviation sector.

Virgin Australia chief executive Jayne Hrdlicka hit back at the time, saying the claim was “nonsense”, and allowing more flights would help to meet the high demand for seats in Australia and reduce airfares.

An aviation expert said the proposed plan will ‘no doubt force Qantas to defend its market share’.

Following today’s announcement, the deal will instantly make Virgin a stronger competitor to Qantas.

It will allows Virgin to return to long-haul international flights for the first time since it collapsed into administration in 2020.

According to the Australian Financial Review, Virgin will operate international services on Qatar planes under an arrangement known as wet leasing; subject to approval from the competition regulator.

The airline will launch flights from Brisbane, Melbourne, Perth and Sydney to Doha – and from there onto Europe – from the middle of next year.

The Qatar deal will also make Virgin’s Velocity loyalty program more competitive with Qantas’ dominant loyalty business.

Ms Hrdlicka described the deal as the “missing piece” in the airline’s strategy, adding they estimate to generate an economic benefit of $3 billion to the Australian economy through incremental visitor flows over the next five years.

“This partnership brings the missing piece to Virgin Australia’s longer-term strategy and is a huge vote of confidence in Australian aviation. Importantly, it will further strengthen Virgin Australia’s ability to compete over the long term, which will inevitably translate into more choice and even better value airfares for consumers as well as additional Australian aviation jobs,” she said.

Qatar Airways Group CEO Badr Mohammed Al-Meer said he believes competition in aviation is a good thing.

“(And) it helps raise the bar, ultimately benefiting customers. This agreement will also help support Australian jobs, businesses and the wider economy.”