Keep Virgin Australia in the Skies

[moa999]

Were you happy that the government propped up Holden for all those years despite them being 100% foreign owned?

Different times.
Can't imagine most travellers would be happy if say a 20% premium was applied on all foreign airlines.

I agree more support needs to be offered to the airline industry, but it can't be endless, and equity should not get a free ride.

 

[AdMEL]

Agreed, what VA needs is something akin to a chapter 11 bankruptcy in US, so VA can cancel any onerous contract, with perhaps the government supplying a loan that ranks above all non-secured creditors to assist with the bankruptcy process and allow the airline to keep operating during the restructure. Obviously that would mean the equity of VA would be wiped out, with the creditors taking over the company.

Although if the above is not possible due to bankruptcy laws, then of course giving VA a cash injection is a clear preference to letting it fail. Whoever thinks a new airline can startup and operate in Australia as a competitor to QF domestically within the next few years is dreaming.

Voluntary administration: A guide for creditors | ASIC

asic.gov.au

KEY:

The purpose of voluntary administration

Voluntary administration is designed to resolve a company’s future direction quickly (the below table summarises the process). An independent and suitably qualified person (the voluntary administrator) takes full control of the company to try to work out a way to save either the company or its business.

i couldn’t help but be amused by the acronym and industry abbreviation for voluntary administration (VA) being the same as Virgin Australia’s airline code (VA).

 

[samh004]

It has been suggested that airfares could rise by 10-30% if there were a monopoly, and no competitor in the marketplace. Let's say 20% for argument sake.

I recall when I first really started flying domestically in Australia, roughly between the period 2009-2011 – and what I remember most about flying back then was the prices, how low the airfares were. You could say to me that it was competition that did that, but these were on routes that VA didn't even fly, and still do not. No other viable competitors. Yet, since that time they have risen every year to the point that they're now 3 or 4 times what they once were. I've also seen prices rise on routes where VA is a competitor, so I don't believe in the notion that without VA or had COVID-19 not taken hold that prices would remain low or where they are. They'd simply continue to rise.

 

[dajop]

I recall when I first really started flying domestically in Australia, roughly between the period 2009-2011 Yet, since that time they have risen every year to the point that they're now 3 or 4 times what they once were.

Of course, it depends on what macroeconomic factors are at play as well, during that period of course there was a lot of suppressed demand due to GFC. Since a big price/capacity war in the early 2010’s both carriers have adopted “capacity discipline”(like the US3 carriers) and thus big increases in prices. Also QF have moved their fare discounting on trunk routes largely to JQ, When JQ first started they didn’t fly trunk routes, whereas as of before COVID they had many daily services on trunk routes.

It could stand to reason that a post COVID world QF being the only operator in the short term could see lower fares as they bring capacity online much quicker than if they have a competitor bringing it online at the same time.

What would be interesting would be to compare fares on some regional routes with 3 way competition (MEL-MQL, SYD-ABX) to those with monopolies (eg SYD-MRZ).

 

[Major]

You have my support and signature

 

[amaroo]

IMHO, any discussions / plans should be framed to start after the business has been placed into administration. Administration will be like a COVID-19 disinfection allowing the business to trade without any excess baggage.

If the business can make it through without entering administration - even better.

 

[33kft]

Frankly, I think any problem could be legislated away for the benefit of all. If we can all agree that the competition is necessary in the local market (it is, those comparisons to Canada's aviation market are apt) and if we agree that the retention of a current viable market participant is preferable (and we should) then let's set the bar where it needs to be. We could set an enforcable target for equity ownership a la Telstra or Qantas, Agribusiness, Media, Banks, Airports etc.

Public funding for VA support could be contingent upon these controls, and that should address the majority of concerns. For anyone concerned by such policies, strap yourselves in, if there's one thing at risk as a result of COVID-19 it's the laissez-faire approach to globalism of late.

 

[samh004]

Frankly, I think any problem could be legislated away for the benefit of all. If we can all agree that the competition is necessary in the local market (it is, those comparisons to Canada's aviation market are apt) and if we agree that the retention of a current viable market participant is preferable (and we should) then let's set the bar where it needs to be. We could set an enforcable target for equity ownership a la Telstra or Qantas, Agribusiness, Media, Banks, Airports etc.

Public funding for VA support could be contingent upon these controls, and that should address the majority of concerns. For anyone concerned by such policies, strap yourselves in, if there's one thing at risk as a result of COVID-19 it's the laissez-faire approach to globalism of late.

I agree with this, and I'm not someone who thinks that Australian businesses should be Australian-owned or any of that mumbo-jumbo. It doesn't matter who owns the business so long as they are running it properly. In terms of a level playing field, their competitor isn't afforded the large overseas investment that they are – or at least not as much, and it appears in this climate, that hasn't been a lot of help anyway. Thus, limiting the overseas ownership percentage couldn't possibly harm them because it's not helping them right now. Their suitors have all but abandoned them.

I just feel that their appeal for a loan, with the condition that if they couldn't repay the loan the Australian government would inherit a share of a loss-making airline was disingenuous. When you're in the position they're in you need to put your best foot forward and that wasn't it.

 

[pauly7]

I agree with this, and I'm not someone who thinks that Australian businesses should be Australian-owned or any of that mumbo-jumbo. It doesn't matter who owns the business so long as they are running it properly. In terms of a level playing field, their competitor isn't afforded the large overseas investment that they are – or at least not as much, and it appears in this climate, that hasn't been a lot of help anyway. Thus, limiting the overseas ownership percentage couldn't possibly harm them because it's not helping them right now. Their suitors have all but abandoned them.

Small point for consideration , VA’s majority owners are all from the same industry and 2 of them very poorly run themselves. Now if they had a big fat VC fund on their board as an owner, merrily making money shirting stocks as they do (or similar) this could be a VERY different discussion

I just feel that their appeal for a loan, with the condition that if they couldn't repay the loan the Australian government would inherit a share of a loss-making airline was disingenuous. When you're in the position they're in you need to put your best foot forward and that wasn't it.

It smells of a shoot for the stars land on the moon strategy to me.

 

[holdenmg]

i couldn’t help but be amused by the acronym and industry abbreviation for voluntary administration (VA) being the same as Virgin Australia’s airline code (VA).

I was reading "EY" as Ernst & Young.
(Now I have coffee, things are better). lol

 

[Rembrandt]

The federal government needs to take action in some form to save the domestic airline industry, otherwise it will cause huge losses in the domestic tourism industry just when it will try to be getting back on it's feet. The federal government has a duty to protect the the transport and tourism sectors in this country.

So what if VA is majority foreign owned? That's the way of the world now isn't it. If people in the government don't like domestic airlines to be majority foreign owned then they should have never allowed it in the first place. The liberal party are neo-liberal right? Rumors have it that some in the federal government want to make room for another airline. What business in this current climate would want to take up that opportunity? Furthermore, it will be a foreign owned airline, understand the stupidity?

The point I've been trying to make to all the don't spent a cent brigade out there is that if VA, Rex and others fail then everybody looses and arguably Qantas as well. There will be a period of time in this country (maybe a year) where we will only be able to travel domestically and we need all the airlines we can to help the failing local tourism sector blossom again.

 

[jb747]

I'm not a business person, but I really doubt that the international part of Qantas can be allowed to fail, without bringing down the domestic part as well. I'm seeing absolutely nothing that gives me any hope of either airline surviving.

 

[jase05]

I'm not a business person, but I really doubt that the international part of Qantas can be allowed to fail, without bringing down the domestic part as well. I'm seeing absolutely nothing that gives me any hope of either airline surviving.

What do you see happening?
Australia is too big of a country and relies on domestic flying for both passengers and freight.
Do you see someone else stepping in?

 

[Rembrandt]

I'm not a business person, but I really doubt that the international part of Qantas can be allowed to fail, without bringing down the domestic part as well. I'm seeing absolutely nothing that gives me any hope of either airline surviving.

Qantas domestic is the most profitable side of the Qantas business. If domestic travel is opened up in the next few months then this will help Qantas survive until frequent international services resume, which could be more than a year away.

Domestic services would also be VA's most profitable arm as well.

 

[Nathant123]

Isn't SYD - MEL one of the busiest routes in the world? There's obviously a big demand for domestic travel in this country considering its size and no other decent alternatives like fast rail. I'm sure that whilst countries have their borders closed for god knows how long, domestic travel will resume much sooner and I'm sure many will be eager to get out and about. I'm doubtful that either airline will shut shop permanently but I'd be curious to know if QF is more heavily reliant on their international side? If its years before International travel returns to how it were a few months ago then perhaps in the long run QF could potentially end up worse off?

 

[dajop]

Isn't SYD - MEL one of the busiest routes in the world?

At 2 flights a day ... not any more

 

[hydrabyss]

Still nothing concrete but still gives hope. I still feel Virgin acted to quick but with stories going round talking about running out of cash at the time what do you do if you feel the second airline is you and help maybe offered early.

https://www.9news.com.au/national/mccormack-still-talking-to-airlines-on-aid/19730db4-a5fb-4529-8c2c-829d177bae05

 

[JK1964]

The government can not say ‘we can’t pick winners and losers’ and at the same time give a life line to small and medium enterprises via BAS credits and jobkeeper. I realise small business is the vast majority of businesses but it should apply across the board. These are exceptional circumstances that deserve extraordinary measures.

 

[clipped_wings]

When the skies are safe to fly again - no-one has more power than the traveller. We contribute to the solvency of an airline, simply by choosing it. Take the volume of passengers that have been displaced in the last 3 months - and multiply it by 12 months. Or two years. That equation can be as simple or complicated as you want it to be. But the fact remains - Australians can fly either Qantas or Virgin Australia - whether we choose to or not is the question. International travel will be redefined in the next 12 months and we can either support our national airlines - or we can fly everyone else and watch these two duke it out to the death. And Qantas WILL win.

Not a worst case scenario. But not a best case one either.

 

[Must...Fly!]

Agreed @clipped_wings that it is our power once things get back to some form of normality.

For both QF and VA, getting at least some part of the domestic fleet back in the air is absolutely critical. I wouldn't be disappointed if VA kept lounges closed to preserve cash for a few months, did away with free catering (except J) and turned off Wi-Fi etc. Bare bones, but maybe necessary.