Virgin Australia is raising more than $300 million in new capital with the help of its overseas shareholders, and Qantas boss Alan Joyce is not happy.
The airline is majority-owned by three overseas airlines — Singapore, Etihad and Air New Zealand — and Joyce thinks they will pump money in until Qantas can’t compete.
Virgin’s business strategy has been to undercut Qantas domestic routes, going for market share in the hopes it will price the bigger, less-nimble Qantas out.
After a letter from Joyce to senior Australian politicians was reported this morning in the Australian Financial Review, the airline has released an official statement. Here it is:
Qantas confirms it has contacted Federal and State governments to express concerns as the national carrier about potentially damaging shifts in Australia’s aviation industry.
The recent announcement by Virgin Australia that it would receive more than $300 million in further capital from three government-backed airlines highlights the uneven playing field created by existing policy settings.
Qantas is a world-class airline, employs over 30,000 Australians and continues to be the carrier of choice for many, but is subject to a unique set of limitations around foreign capital with no corresponding concessions.
Virgin Australia’s proposed capital raising could see its foreign ownership rise to more than 80 per cent without the need for any further regulatory approval. Despite this, the airline would retain all the traffic rights given to Australian carriers.
If wholly privatised, Virgin Australia’s ability to receive potentially unlimited capital from its government-backed owners would seriously distort the domestic aviation market for the benefit of foreign interests.
The decision of these shareholders to invest in Virgin Australia’s loss-making strategy highlights that these airlines aren’t subject to the same commercial realities as Qantas.
We have asked Federal and State governments to fully examine the motives behind the virtual takeover of Virgin Australia by foreign airlines, and to prevent destabilising of the domestic aviation industry, local tourism and jobs.