‘Fierce competition’ at the heart of airline CEOs’ friendship

Jayne Hrdlicka and Alan Joyce may be longstanding friends but as the CEOs of rival airlines they are among the fiercest in the country.

CEO of Virgin Australia Jane Hrdlicka alongside drag performer Maxi Shield and cabin crew member Penny Tration ahead of the annual pride flight from Brisbane to Sydney. Picture: Zak Simmonds

EXCLUSIVE

It’s one of the most intriguing relationships in corporate Australia. Virgin Australia CEO Jayne Hrdlicka and Qantas boss Alan Joyce somehow maintain a close friendship despite their fierce professional rivalry.

Phone calls between the two have been described as “unusual” by Australian Competition and Consumer Commission chairman Rod Sims but dismissed by Ms Hrdlicka as nothing more than two friends and former workmates catching up.

The friendship has been on the radar of the ACCC since Ms Hrdlicka took on the role in late 2020, but the watchdog is not willing to say how closely it’s looked.

“The ACCC is unable to comment on whether an investigation has been undertaken or not,” said a spokesman in response to queries about the phone calls.

“All businesses should be aware of their obligations under Australia’s competition laws.”

Ms Hrdlicka is hesitant when asked how often she speaks to Mr Joyce, saying “oh, you know, we won’t go there”.

“I’ve got a longstanding relationship with Alan. We’ve worked together, we’re good friends but we’re fierce competitors and that’s the essence of it,” said the former Jetstar CEO and Qantas executive.

“There is no scenario where anybody in our business or any other airline would do anything other than strictly adhere to competition law and competition boundaries and you can’t argue if you look at what’s happening in the country today.

“Prices have never been cheaper, competition has never been more fierce and it’s great for Australia.”

The public rivalry between the two was never more apparent than at Qantas’s half year results, where Mr Joyce suggested the flying kangaroo was not even in the same race as Virgin Australia, Rex and Bonza.

“We’re just watching this battle go on with these three carriers in that little space,” he said of the 35 to 40 per cent of the market not commanded by Qantas or Jetstar.

“Qantas is by far the best premium carrier. Jetstar has the lowest cost base and continues to do so. Jetstar kills that end of the market.”

He also took aim at US private equity firms operating airlines in Australia due to the country’s lack of foreign ownership restrictions on carriers other than Qantas.

Ms Hrdlicka fired back on Friday, insisting foreign owned airlines, like Virgin Australia, were necessary to provide competition and keep airfares low.

She said Australian travellers would be much worse off if the market was more restricted.

“It’s seriously important to the country to ensure that we have strong competition domestically because it’s vital for the economy,” said Ms Hrdlicka.

“The more people you have flowing around the country, the more money is being spent all around the country and all parts of the economy depend on the belly space (of aircraft) and the passenger space. I think it would be a big call to change it because you want to know you’ve always got competition and the position that’s been taken is important to maintaining competition.”

To that end, the expansion of Rex into major city routes and the mid-year launch of low cost carrier Bonza were welcomed by Ms Hrdlicka, provided they did not encroach on Virgin’s market share.

She said Virgin Australia was secure in its position in the market, where it held a 33 per cent stake that she was confident of maintaining.

“We’ve got a very strong balance sheet, we’ve been very prudent, we’ve taken $300m out of our domestic cost structure,” said Ms Hrdlicka.

“We’re very lean, we’re performing well, our load factors are high and we’re really excited about the reaction we have from the marketplace.”

Although reluctant to discuss other airlines, Ms Hrdlicka did share her concerns that the strategy adopted by newcomer Bonza may not work in Australia.

The budget airline, financed by the Miami-based 777 Partners, is targeting regional routes largely unserviced by other carriers, using Boeing 737 Max 8s.

“If you’re connecting two cities that have never seen a connection before, if you’re flying it twice a week, it’s very hard to build an underlying presence in that marketplace,” she said.

“The way that’s done in Europe and in the US and Canada, it’s a huge market with millions and millions of people and you can approach that with group tours and things like that which don’t really exist in the same way in Australia.

“I think it’s an interesting idea, a different approach and we’ll just see how it plays out.”

The ACCC will certainly be watching how it plays out, and ensuring Qantas and Virgin Australia play fair.

In a speech to the National Press Club, chairman Rod Sims said the watchdog was particularly wary of “slot hording” and flying new routes at a loss to damage new entrants.

“Such predatory behaviour can damage competition and the Australian economy,” he said.