Rex needs an owner, Virgin a CEO, Qantas needs to fly under the radar

There’s two major positions/opportunities currently vacant in Australian aviation.

Number one: Seeking new owner for clapped-out regional airline Rex – government expressions of interest welcome, competitors need not apply.

Number two: Candidate sought to run the country’s second-largest airline, Virgin Australia. Applicants with a history of industrial relations pugilism will not be considered. Contenders may need experience working with a Middle Eastern major shareholder.

Labor says it will buy failed airline Rex if no private bidder emerges.Credit: Andrew Taylor

Australian aviation isn’t just an industry – it’s a messy headline.

And it’s now a sector which is way too influenced by non-shareholders – its major union, the Transport Workers Union, and the federal government, which is considering the effective nationalisation of Rex for what looks like political reasons.

Sure, the union is lobbying for Canberra to buy or support others to rescue Rex. But the government’s desperate scramble to ensure regional customers are served by aviation services in the lead-up to an election looks like a far stronger motivation for it to become Rex’s buyer of last resort.

The Labor government has already pumped $130 million into the regional arm of the struggling airline since it was placed into administration last year, yet still says there appears to be no viable outside buyer for it.

Bailing out a very poorly run airline that made strategic blunders and serves as a template for poor corporate governance is a bad look for any government.

Life-saving as it has been to some regional communities, bailing out a very poorly run airline that made strategic blunders and serves as a template for poor corporate governance is a bad look for any government.

It is a look worsened by the fact that Rex’s strategic blunder – its costly expansion to compete on capital city routes – was partly funded from the Morrison government’s COVID support package.

Both major parties have a strange, inconsistent and underwhelming history of dealing with our airlines. The most recent example was the Albanese government denying Qatar’s application for additional flights into Australia.

(The government is now tasked with making a call on whether Qatar is suitable to become a 25 per cent shareholder in Virgin – which over time could lead to it becoming its controlling shareholder.)

Another bad look is the decision to rescue Rex, but allow Virgin to collapse into administration in 2020 – the latter also carried its own financial baggage, but was tipped over the edge as a result of the pandemic.

Whether the claim by a gaggle of small regional airlines that they could divvy up the Rex routes is plausible hasn’t been tested because they assert they haven’t been given the opportunity to pitch.

But both the TWU’s influence in the vetting of a new chief executive for Virgin and the union’s support from Employment Minister Murray Watt are big swings.

Watt warned Virgin to carefully consider the industrial relations track record of the person who succeeds Jayne Hrdlicka as CEO – a pointed reference to its chief customer officer Paul Jones, who until last week was widely expected to be appointed to the top job.

In his previous role as a senior executive of Qantas, Jones was deeply involved in the now-infamous and illegal sacking of 1700 ground handling staff. Following Watt’s interference, Virgin announced Jones’ candidacy was off the table.

So it’s back to the selection drawing board for Virgin, a year after Hrdlicka signalled her intention to resign. She reportedly reaffirmed to senior management last week that she still wants to leave.

What six months ago looked like a company undertaking a thorough selection process now looks like a desperate and chaotic hunt for a leader.

And it must be playing havoc with Virgin’s drawn-out plans for a sharemarket listing.

The gestation period of this IPO has now stretched to two years – longer than that of the African elephant.

US private equity firm Bain bought Virgin from the rubble of administration in 2020 and has overseen its revival to profit. But the IPO – or liquidity event – that would allow it to sell down and take some more money off the table is proving elusive.

It probably hadn’t bargained on operating in a market where government and unions can heavily dictate the corporate course of flying.

Qantas knows this best of all. In the post-Alan Joyce world, Qantas understands it just needs to stay under the radar.

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