Government should not nationalise Virgin Australia, says Qantas’ Alan Joyce

Qantas chief says government shouldn’t nationalise struggling competitor Virgin, as NZ steps in to shore up its airline.

Qantas chief executive Alan Joyce has warned Scott Morrison not to nationalise airline competitor Virgin Australia, saying he cannot pick winners and losers.

“That would be completely unfair. We would be competing against the federal government,” Mr Joyce told Sky News on Friday morning.

“It has to treat the aviation sector the exactly same.”

Mr Joyce’s comments came Qantas announced on Thursday that it was standing down around two-thirds of its workforce, or around 20,000 people, as work dried up in the face of the crisis in international aviation brought on by the coronavirus pandemic.

“When good companies have managed their position very well, the government should let them manage their way through this.

“And not look after the badly managed companies which have been badly managed for 10 years.”

Josh Frydenberg has not ruled out nationalising firms like Virgin, but said on Friday that the issue was not in focus at present, as the government was preparing a second round of coronavirus-fighting fiscal measures.

“As you know we announced a more than $700 million package to the aviation sector because that’s a critical sector to the Australian economy,” Mr Frydenberg said.

“We understand what the airlines are going through. We made a down payment on that support and continue to maintain a watching brief.”

Virgin suspended all international flights on Wednesday, a move which Qantas mirrored on Thursday.

On Tuesday, The Australian’s DataRoom column reported that Virgin Australia was understood to be working closely with legal experts from law firm Clayton Utz, with the company increasingly operating under a financial cloud.

Virgin notified investors that ratings agency S&P Global had downgraded its credit rating to B- on deteriorating domestic market conditions and placed it on credit watch negative.

Speaking on Friday. Business Council of Australia chief executive Jennifer Westacott railed against the idea of nationalising firms to fight the coronavirus economic downturn,

Ms Westacott said a “modern market economy” could still survive the pandemic.

“We do know that this will come to an end, unlike the GFC ... the job is to keep companies going,” she told Sky News. “The problem with nationalisation is what Alan Joyce said, it’s about picking winners.

“What we need to come out of this crisis is a modern market economy, not an economy that looks like something out of the 1950s. That is not the way to bounce back from this.”

Mr Joyce’s comments came as New Zealand’s government agreed to provide a $NZ900m loan to the national flag carrier Air New Zealand for the next 24 months.

“Without this intervention, New Zealand was at risk of not having a national airline,” Finance Minister Grant Robertson said.

New Zealand closed its borders to foreign visitors on Thursday in an attempt to slow the spread of the novel coronavirus. Air New Zealand had already cut international flights by 85 per cent as travel restrictions around the world escalated in the past month.

Air New Zealand will play a part in ensuring that New Zealanders overseas can return home and that essential flights and freight routes for goods such as pharmaceuticals remain open, Mr. Robertson said.

“Air New Zealand has a unique and critical role in our economy and society,” he said.

The loan to the airline, which is 52 per cent owned by the government, could be repaid by raising capital or by the government converting the debt to equity, according to the agreement between the carrier and the government.

As a condition of the loan, Air New Zealand cancelled an $NZ124 million interim dividend payment to shareholders. It will also not pay dividends while the loan facility is in place.

with Dow Jones Newswires