Qatar Airways to take 25 per cent stake in Virgin Australia subject to regulatory approval

Virgin Australia has confirmed its plan to sell a 25 per cent stake to Qatar Airways, ahead of an anticipated return to public ownership.

Virgin Australia’s planned return to international long-haul flying via a controversial new deal with Qatar Airways has set the stage for another battle with Qantas, with Australia’s biggest airline to oppose the proposed arrangement as bilateral air rights by stealth.

Under the deal, which will see Qatar Airways take a 25 per cent stake in Virgin Australia, the Doha-based airline will be able to operate more flights in and out of Australia as part of a “wet lease”.

Under that arrangement, one airline sells seats on flights operated by another carrier, which uses its own aircraft and crew.

Qantas currently has a wet lease with Finnair on Sydney-Bangkok and Singapore routes, with the intention of switching to a dry lease from late 2025.

In a dry lease, an airline uses another carrier’s aircraft but crews the flight with its own employees.

Virgin Australia’s plan is to use Qatar Airway’s Boeing 777s or A350s on routes from Sydney, Melbourne, Brisbane and Perth to Doha from July 2025.

The aircraft would be crewed by Qatari pilots and flight attendants, but the flights would be marketed and sold as Virgin Australia services, provided it gets approval from the Australian Competition & Consumer Commission.

Qantas is expected to make a submission to the ACCC opposing the proposed deal. Qantas declined to comment on the deal. Its shares fell 3.4 per cent or 25c to $7.17 after hitting a record on Monday.

The federal government refused to grant Qatar Airways more bilateral air rights last year when the airline sought to add another 28 flights a week into Australia.

Transport Minister Catherine King found the flights were not in the national interest, in a decision that was scrutinised by a Senate ­inquiry.

Qatar Airways has since reapplied for additional bilateral air rights, with the application currently with the Department of Infrastructure and Transport.

Virgin Australia CEO Jayne Hrdlicka said the deal with Qatar Airways was “absolutely not” triggered by the Gulf carrier’s difficulty in obtaining more air rights, but had come about as a result of their close relationship.

“We have been in partnership with Qatar for the last couple of years since 2022,” Ms Hrdlicka told The Australian.

“We’ve been in a codeshare relationship that was the start of our journey together and the relationship has been going from strength to strength, and it’s resulted in today’s announcement, so we’re really excited about that.”

The proposed sale of a 25 per cent stake in Virgin to Qatar Airways is also subject to the approval of the Foreign Investment Review Board.

According to the FIRB website, applications for foreign investment must be determined by the Treasurer within 90 days, but there is provision for that period to be extended by as much as six months.

Ms Hrdlicka would not be drawn on the dollar value of the proposed deal with Qatar Airways, but said it would help Virgin Australia compete effectively against Qantas through a well resourced domestic operation, and access to a world-class international network.

Qatar Airways would be given a seat on the board of Virgin Australia once the investment was approved by the FIRB.

Ms Hrdlicka said Qatar Airways would be the sole “big strategic investor”, ruling out a return to the days when multiple airlines held a stake in Virgin.

“We’ve learned the lessons of the past. We think it’s very important for Virgin Australia’s future that we have one big strategic investor and that for us is Qatar Airways at a 25 per cent equity stake and that’s it, in terms of strategic investors,” said Ms Hrdlicka.

“Then we’ve got the opportunity … whenever the time is right, to migrate to an ASX listing and attract institutional investors and retail investors that will flesh out the share registry.”

Qatar Airways’ stake in Virgin Australia would reduce the ownership of Bain Capital to 67.5 per cent, with Virgin Group retaining its 5 per cent share, and QIC 2.5 per cent.

A QIC spokesman indicated the Queensland government was supportive of Qatar coming on board as a shareholder, calling the proposed investment “a strong endorsement of Virgin’s performance as a Queensland-headquartered business”.

Airports were adamant the deal must go ahead in the interests of a competitive domestic aviation industry.

Canberra Airport chief executive Stephen Byron urged the federal government to move quickly to approve the deal.

“Basically the industry needs confidence … that when good quality capital and a fantastic airline partner comes along, that it’s welcome,” Mr Byron said.

“Capital needs to be seen to be welcome in the domestic aviation industry. It’s not like there’s a queue five deep of those willing to invest in competition in the aviation industry.”

The Australian Airports Association also welcomed the potential for “improved capacity and better choices for passengers” in the Australian market.

“A proposed ownership stake by Qatar Airways would provide Virgin Australia with significantly greater capabilities, particularly in the international sector,” said AAA head of policy and advocacy Natalie Heazlewood. “Last financial year, international passenger numbers were still nearly 8 per cent below pre-pandemic levels, so we hope this deal also encourages further recovery in the aviation sector.”

Ms Hrdlicka was quietly confident the deal would get the green light from the relevant authorities because of what it meant to “Virgin Australia’s ability to compete domestically over time”.

She said sealing the deal was one of the “highlights of her career” and she paid tribute to Virgin’s 8000 employees for their contribution.

“It’s been great to do something that’s so strategic and so pivotal to Virgin Australia’s ability to support the community over time. We take that job really seriously,” she said. “We exist to support the community and setting this deal in motion puts Virgin in a position where it will be going from strength to strength for decades to come.”

Qatar Airways group chief executive Badr Mohammed Al-Meer echoed Ms Hrdlicka’s sentiments, saying they were “really pleased” to announce the proposed strategic investment in Virgin Australia. “We believe competition in aviation is a good thing and it helps raise the bar, ultimately benefiting customers,” said Mr Al-Meer.  “This agreement will also help support Australian jobs, businesses and the wider ­economy.” 

Bain Capital partner Mike Murphy said they were pleased to welcome Qatar Airways as a partner to build on Virgin Australia’s strong foundation. 

“Over the past four years, we’ve had the privilege of working alongside a team that has shown the dedication and tenacity needed to revitalise the airline,” said Mr Murphy.

“After a decade of losses resulting in administration, Virgin Australia has emerged as a strong and profitable company with an attractive market position, a loyal customer base, and a promising growth trajectory.”.

Originally published as Qatar Airways to take 25 per cent stake in Virgin Australia subject to regulatory approval