- The Queensland state government has revealed it will make a play for Virgin Australia.
- Calling the investment bid “Project Maroon”, State Treasurer Cameron Dick confirmed the Palaszczuk government was considering “a direct equity stake, a loan, a guarantee, or other financial incentives”.
- It comes after rival states indicated they would compete for Virgin Australia to relocate its headquarters from Brisbane, and the federal government refused to step in as the airline entered voluntary administration.
- Visit Business Insider Australia’s homepage for more stories.
The Queensland state government has thrown its hat in the ring to buy a stake in Virgin Australia and save the airline from collapse.
It confirmed this week it was looking to compete with a small group of investors circling Virgin, and considering rescuing it from its $6.8 billion debt as it remains in voluntary administration.
Treasurer Cameron Dick confirmed on Wednesday the state’s interest, noting the Palaszczuk government did not want to see a repeat of Ansett’s collapse, after which domestic airfares surged.
“We have been very clear – two sustainable, national airlines are critical to Australia’s economy,” Dick said in a statement issued to media.
Calling the bid “Project Maroon”, Dick said the “investment could take the form of a direct equity stake, a loan, a guarantee, or other financial incentives.”
“We have an opportunity to retain not only head office and crew staff in Queensland, but also to grow jobs in the repairs, maintenance and overhaul sector and support both direct and indirect jobs in our tourism sector,” he said.
The bid appears to be a departure from early calls from the Palaszczuk government which revealed it would be willing to throw Virgin a $200 million lifeline but needed the federal government to also intervene — a call the Morrison government repeatedly refused.
Nor was it the only state government willing to make concessions. In fact both New South Wales and Victoria’s respective governments had both indicated they wanted Virgin to relocate its headquarters from Brisbane to their own capital cities to bolster local jobs. They were bids that received a blistering rebuke from Dick who told the Liberal New South Wales Government, the earlier of the bidders, to “back off on stealing Virgin”.
“At a time of crisis, we should not get into a bidding war, but if it comes down to it, other states and need to know that our government will stop at nothing to win it,” Dicksaid.
Now it appears Queensland has pulled out all the stops to protect 1,200 Brisbane jobs – much to the chagrin of federal ministers.
“They should stick to trying to run Queensland and Queensland’s economy,” Federal Transport Minister Michael McCormack told the ABC on Thursday. “I think this should be left to companies. [It] should be left to potential bidders and investors who aren’t necessarily government.”
Home Affairs Minister, and former Queensland highway patrol cop, piled on as well.
“Premier Palaszczuk has almost bankrupted Queensland, and now in the middle of a crisis they want to buy an airline,” he said in a tweet. “It is laughable. She ‘leads’ a government which is corrupt and chaotic.”
Premier Palaszczuk has almost bankrupted Queensland, and now in the middle of a crisis they want to buy an airline. It is laughable. She “leads” a government which is corrupt and chaotic.
— Peter Dutton (@PeterDutton_MP) May 13, 2020
But while Australian politicians of all shades might be tying themselves into knots over Virgin, it remains unclear if Virgin actually needs them at all.
Despite being saddled with debt, and facing a new incursion from a Rex expansion into the domestic market, the airline is still courting multiple private investors, with three equity firms Brookfield, BGH Capital and Bain Capital, emerging as the frontrunners.
With the window for initial bids closing on Friday, there is still potential for some upsets. Mining magnate Andrew Twiggy Forrest is believed to be considering his own bid, although, as the AFR reports, is expected to join another consortium rather than mount his own challenge.
Ultimately a Queensland bid may not be required, nor is relocation south of its borders necessarily even viable. Consider the staggering debts the airline faces, the poor short-term outlook for the aviation industry and the growing competitive landscape it faces at home.
An unnecessary move of 1,000 plus staff and the construction of new offices in one of Australia’s most expensive cities hardly seems like a good fit for an airline sure to enter a serious phase of cost-cutting. Nor may the prospect of relocating to a half-built Western Sydney airport hold much allure.
If it comes down to state concessions, Queensland has already shown it is willing to lay down for the airline to get it to stay should it come to that. As jobs becoming increasingly rare, this latest bid may be the state’s way of indicating its commitment simply runs deeper than its competitors.
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