Canberra must save Virgin if no one else can, says Liberal MP Falinski
A federal Liberal MP says the Morrison government should rescue Virgin if there is no other option.
The Morrison government is under pressure from its own ranks to mount an 11th-hour rescue bid to save Virgin Airlines, with the company poised to go into voluntary administration within days.
The calls by Coalition MPs to prevent the airline’s collapse came as former Queensland premier Peter Beattie warned the tourism sector would be devastated if Virgin were allowed to go under.
It echoes calls from the competition watchdog that the government needed to step in to protect competition in the aviation sector, with the loss of Virgin reducing Australia to a single-major-carrier market.
The Australian understands the airline is expected to be put into voluntary administration within days unless a private sector solution can be found or the federal government steps in.
NSW Treasurer Dominic Perrottet on Sunday revealed his government was in discussions with Virgin over relocating its headquarters to the western Sydney airport and the government had a great interest in maintaining a competitive airline industry.
“I’ve raised that with Virgin over time and it’s part of the discussions we are having at the moment,’’ he told Sky News.
“But again, any decision we make in relation to financial support would have to be in the best interest of the taxpayers of our state. “It would not be uncommon for governments to be engaged in this space because it’s not like you’re propping up a company that has failed because of poor financial management, it has struggled due to the pandemic and through issues outside their control through government orders that have been put in place.’’
A bailout bid by China Southern airlines, a Virgin shareholder, is likely to be rejected by the government, which has called for a private sector rescue, on the grounds the Chinese carrier is owned and controlled by the Chinese Communist Party.
Federal Liberal MP Jason Falinski said the airline should be saved amid conflicting government messages about potential plans to rescue the airline.
Mr Falinski doubted whether a Chinese state-owned entity would be allowed to take control of Virgin under current foreign investment rules relating to state-owned foreign enterprises.
Treasurer Josh Frydenberg recently reduced to zero the threshold to trigger Foreign Investment Review Board intervention for foreign bids on local assets amid fears China would launch raids on distressed Australian companies.
“I think we need to keep it alive. There are good economic reasons for doing that and there are also good legal reasons as well,” Mr Falinski said. “The best outcome is the current shareholders inject funds to keep it alive. If they are not going to do that, then new shareholders need to be found who will do that. If that can’t be done, then that leaves the federal government and the taxpayer as the buyer of last resort. We have to ensure that if we get involved, there is no upside for the current shareholders so you don’t create a moral hazard whereby shareholders constantly think they can go to taxpayers for bailouts.”
Mr Falinski said there should not be additional support for Qantas if Virgin is propped up because “we cannot help everyone … it must be limited and targeted”.
The Queensland government has offered $200m in an effort to reignite the rescue bid for Virgin, with the funding contingent on federal government backing, the company restructuring debt, and the airline keeping its headquarters in Brisbane.
It is well short of the $1.4bn loan sought by the airline, but adds to the mounting pressure on Canberra to step in and encourage other states to follow suit.
Mr Beattie said the $10m he gave Virgin to station its headquarters in Queensland in 2000 was the “best deal we ever did”. He said it injected much-needed life into the state’s tourism industry, as the new airline offered cheaper fares to under-serviced destinations such as the Whitsundays.
Additional reporting: Greg Brown, Rachel Baxendale
More Coverage
Chinese navy’s live weapons exercise out of the blue
The Albanese government has lodged a diplomatic protest with Beijing after commercial flights were forced to change course at short notice to avoid a live weapons drill by Chinese warships between Australia and New Zealand.
RBA late to start raising rates, says Bullock
Conceding that her predecessor Philip Lowe should have started raising interest rates earlier, Michele Bullock on Friday said the RBA board’s concern it could be acting too late again spurred it to cut the cash rate on Tuesday.