How a simple favour brought Virgin Australia and Qatar Airways together

In need of a favour when the pandemic erupted, Jayne Hrdlicka reached out to Qatar Airways, laying the foundation for what should prove to be a very lucrative relationship.

When Covid lockdowns hit and borders slammed shut, Jayne Hrdlicka needed a favour.

Her two teenage sons were stranded in Europe and she was desperate for them to return home.

Calling on her contacts in the aviation industry, Hrdlicka received an introduction to Akbar Al Baker at Qatar Airways – one of the few carriers still operating regular flights to Australia.

Her request for help was granted and her boys were delivered safely home, marking the start of what would become a close association with Qatar when Hrdlicka took the reins of Virgin Australia at the end of 2020.

Just 18 months later, Virgin and Qatar had become codeshare partners, meaning the airlines could sell tickets on each other’s flights.

Shortly after Al Baker raised eyebrows when he told an International Air Transport Association summit Virgin was not his first choice of airline partner in Australia – but he had given up waiting for Qantas.

“We tried to do work with Qantas for a very long time and we realised that it’s not going to happen because they have partnered with somebody (Emirates),” Al Baker said in June 2022.

The remark revealed as much about his regard for Virgin as it did about his frustration with Qantas, which would only deepen in the year to come.

Fortunately for Virgin, Al Baker was replaced as CEO last year by the more progressive and diplomatic Badr Mohammed Al Meer.

But the bad blood between Qatar and Qantas continued to grow, as Qatar sought to double its capacity into Australia Post-pandemic.

Having continued to fly to Australia throughout the health crisis, often with just a handful of passengers on board, while Qantas halted its international services – other than those subsidised by taxpayers – Qatar believed it would be “rewarded” with more bilateral air rights.

But that was not to be, with federal cabinet accepting Qantas’s argument the additional 28 flights a week by Qatar into Sydney, Melbourne, Brisbane and Perth would “distort the market” at a time when other airlines were still recovering.

Qatar Airways refused to comment on the knockback, leaving it to Virgin Australia to express outrage, in a manner that made it clear those flights were every bit as important to them as their Doha partner.

Virgin Australia CEO Jayne Hrdlicka has scored what she calls ‘a career highlight’ with the Qatar Airways deal.

Appearing before a Senate inquiry examining the decision, Hrdlicka said she regretted not lobbying the government more actively and aggressively on the issue.

“The case for granting (the flights) however seemed so compelling that we did not believe it was either necessary or indeed appropriate,” Hrdlicka said on September 27, 2023.

“We, in hindsight, naively assumed the overwhelming economic benefits to Australia from 28 additional flights a week from Qatar would win the day, let alone in an environment where inbound, widebody capacity is desperately needed.”

A year later, it appears Virgin and Qatar have found a loophole, allowing them to bypass the tedious process of bilateral air rights and finally get some more metal in the air.

Under a deal announced this week, Qatar will take a 25 per cent stake in Virgin Australia for an undisclosed sum, as part of a “deeper strategic relationship”.

Central to the deal, Virgin will embark on a wet lease arrangement with Qatar as a way to return to long-haul international flying without having to buy more aircraft.

In a “wet lease” one airline uses its own aircraft and crew to operate flights that are sold and marketed exclusively by another.

In this case Qatar Airways will provide 777s or A350s, as well as pilots and crew, for an additional four flights a day from Doha to Sydney, Melbourne, Brisbane and Perth.

The only difference between these flights and those Qatar currently operates on those routes is that they will be ticketed as Virgin Australia services.

A Virgin insider revealed there was no party or dinner to mark Tuesday’s announcement, with much of the hard work still ahead of them to bring the deal to fruition.

With a proposed start date for the flights of July 2025, Virgin and Qatar are banking on a relatively quick approvals process through the Foreign Investment Review Board and Australian Competition & Consumer Commission.

It’s a reasonable assumption to make, given Treasurer Jim Chalmers’ comments this week in support of a “strong competitive airline industry” and the ACCC’s approval of similar deals.

However, after being burnt last year, Virgin isn’t leaving anything to chance, hiring lobbying firm TG Public Affairs, whose principal, Michael Choueifate, is Anthony Albanese’s former chief of staff.

What’s less well known is what Qantas might have up its sleeve, given its reputation as an “aggressive industry player with a strong presence” in Canberra.

Since Tuesday’s announcement Qantas has declined to comment on the Qatar-Virgin deal, even as its share price tumbled in response.

But it seems plain Qantas will not sit idly by and watch as its only domestic rival climbs into bed with what is not only the world’s best airline but also one of the richest.