Qatar Airways to acquire 25% of Virgin Australia

[pangwen]

Jayney emailed today, saying Virgin is aiming on getting approved 25% Qatar ownership, AND adding this VERY interesting tidbit -

Subject to relevant regulatory approvals, Virgin Australia will launch flights from Brisbane, Melbourne, Perth and Sydney to Doha from mid-2025, connecting seamlessly into Qatar Airways’ global network1. These extra flights will be operated under wet-lease by Qatar Airways and will open up more than 100 new connecting itineraries across Europe, the Middle East and Africa for Australian travellers.

Others have already pointed out this was mentioned various times earlier in this thread, but the last sentence is a bit puzzling. Given QR already fly from BNE, MEL, PER and SYD to DOH, surely those connecting itineraries to destinations in Europe, ME and Africa are already possible?

EDIT: Unless we're talking about situations like someone flying to Europe from ROK. It's currently possible to get to DOH via BNE from ROK (VA-QR). But on the way back, the flight arrives in BNE too late to connect to VA's last ROK departure. I guess if VA's extra flight made it double daily for BNE, they could have a morning arrival in BNE which provides better regional QLD connections.

 

[Human]

Why would you assume that they would move in that direction and not in the direction of QR?

Because moving in the direction of QR would make Velocity redemptions more unattractive in terms of price and points required than Qantas, and I think there are significant consumer and market forces in Australia which would be a strong disincentive for Virgin to do that.

 

[elanshin]

Because moving in the direction of QR would make Velocity redemptions more unattractive in terms of price and points required than Qantas, and I think there are significant consumer and market forces in Australia which would be a strong disincentive for Virgin to do that.

But ultimately the one that would calling the shots on this specific route would be QR. They'd be undercutting themselves whilst providing the labour and aircraft to VA.

 

[justinbrett]

Because moving in the direction of QR would make Velocity redemptions more unattractive in terms of price and points required than Qantas, and I think there are significant consumer and market forces in Australia which would be a strong disincentive for Virgin to do that.

I think it will come down to how much VA has to pay QR for the redemptions.

I don’t think attractiveness comes into it at all.

 

[antycbr]

I think it will come down to how much VA has to pay QR for the redemptions.

I don’t think attractiveness comes into it at all.

Yes but the bit of VA driving its valuation is Velocity not the flying business. If Velocity is not competitive then the airline valuation is affected.

 

[moa999]

So when do we think these seats might go on sale (will presumably cause some reactions)

 

[henrus]

Others have already pointed out this was mentioned various times earlier in this thread, but the last sentence is a bit puzzling. Given QR already fly from BNE, MEL, PER and SYD to DOH, surely those connecting itineraries to destinations in Europe, ME and Africa are already possible?

You can expect QR to almost double their frequencies with half being a QR operated but “VA” flight.

Not quite the same but the QR/AY agreement shows what this could look like, it’s an AY flight with AY crew but 90ish% is only bookable under the QR code.

 

[HS-TQE]

VA as it is obviously have a set up that allows them to fly International routes. After all they have been flying internationally to HND for over a year. Pretty sure Bain would have a clued up legal team to ensure that continues.

Bain has had the VAi international subsidiary since they took over (acquired from the VA 1.0 administration) which was rebooted for Short International Routes to Bali, the Pacific Islands and NZ.

 

[ben95]

How Qatar outmanoeuvred Qantas on international flights

After Qantas successfully lobbied against extra Qatar Airways flights, the Middle Eastern airline has exacted revenge on the Flying Kangaroo with a deal that will increase competition and possibly result in cheaper fares.

www.abc.net.au

Some additional media coverage has came out this morning.

 

[Himeno]

Others have already pointed out this was mentioned various times earlier in this thread, but the last sentence is a bit puzzling. Given QR already fly from BNE, MEL, PER and SYD to DOH, surely those connecting itineraries to destinations in Europe, ME and Africa are already possible?

QR has a banked hub at DOH with 3 or 4 banks throughout the day.
Right now, they can only connect through the AU flights on 1 bank. They want to have AU on 2 banks, so a flight to the 4 major ports out of DOH every 12 hours

 

[elanshin]

One of the biggest things that will determine and set the tone is if QR will leave the current VA SQ agreements alone or if they'll ask for amendments.

I hope that they leave it alone, but if they do mess with it, I wouldn't even be sure if this would be beneficial for VA. Would rather have SQ as a partner than QR by a long mile.

 

[TheInsider]

One of the biggest things that will determine and set the tone is if QR will leave the current VA SQ agreements alone or if they'll ask for amendments.

I hope that they leave it alone, but if they do mess with it, I wouldn't even be sure if this would be beneficial for VA. Would rather have SQ as a partner than QR by a long mile.

I believe QR wants to do best for QR, I really don't think they care about the other partners and will eventually want all that traffic, especially SQ's EU traffic. I can't see many of these extra 'partners' lasting too much longer.

 

[downtheback]

Gov might approve the buyout, but no way Virgin is allowed to wet lease those planes (long-term at least). Whilst an internation entity can run and own a domestic airline, any international airline needs to be australian domiciled. Qatar wet leasing to circumnavigate bi-laterals will come right up against this.

Don't they say "if you find it 10percent cheaper then we will refund" or something like that?

Wonder if Qantas would ever say that......,

Bunnings only price matches on the same item including #/weight/size etc. Funnily enough, bunnings seems to stock most items in exlcusive sizes that competitors don't get, rendering this mostly useless.

 

[justinbrett]

One of the biggest things that will determine and set the tone is if QR will leave the current VA SQ agreements alone or if they'll ask for amendments.

I hope that they leave it alone, but if they do mess with it, I wouldn't even be sure if this would be beneficial for VA. Would rather have SQ as a partner than QR by a long mile.

It’s easily fixed with geographic restrictions (ie Asia only for SQ, no Asia / Americas for QR) which is how QF/EK do it.

The current ACCC codeshare approval for VA doesn’t permit overlapping routes, so really nothing can be taken for granted, especially as QR already has a JV approved with BA/IB. I can’t see that becoming a foursome. QR may have to break away.

 

[Human]

I believe QR wants to do best for QR

Well, any company hopefully wants to do what's best for itself. In Australia that's a legal obligation, more or less.

But if it owns a part of VA, that means it will want a profitable, attractive and viable VA. One of the pillars of that at the moment is the SQ alliance. And remember that QR obviously can't match SQ's reach into Asia.

Companies have made stupider mistakes, but it would seriously undermine the value and attractiveness of VA and Velocity in particular, and therefore VA's profitability, if Qatar went down that road.

 

[elanshin]

I believe QR wants to do best for QR, I really don't think they care about the other partners and will eventually want all that traffic, especially SQ's EU traffic. I can't see many of these extra 'partners' lasting too much longer.

It’s easily fixed with geographic restrictions (ie Asia only for SQ, no Asia / Americas for QR) which is how QF/EK do it.

The current ACCC codeshare approval for VA doesn’t permit overlapping routes, so really nothing can be taken for granted, especially as QR already has a JV approved with BA/IB. I can’t see that becoming a foursome. QR may have to break away.

Which would put the whole thing in a conundrum if people start just transferring VFF to KF and booking on SQ. Then what? stop the transfer and kill one of the most lucrative aspect of VFF?

Losing SQ for QR is a net negative overall given our geographical location.

 

[ben95]

but no way Virgin is allowed to wet lease those planes (long-term at least).

I can see the government to require that after X years VA will have Australian based pilot and crew operate “VA controlled” aircraft will be a condition and should be acceptable to Bain/VA. Ultimately I think this wet lease to get started then after X years transition to VA controlled operation within a JV setting is the best bet to have a viable 2nd international airline flying out of Australia.

In the long term that’s good for consumers as those being VA controlled aircraft can incentivize VA to expand into other international markets. It’s also good for the sector meaning more opportunities for pilots, crews and engineering positions. In the short term that does mean QR is probably profiting more from the wet lease arrangement compared to a typical JV where VA does its own flying but I think putting a time on it will give the business an opportunity to give this a go.

 

[odysseus]

In the long term that’s good for consumers as those being VA controlled aircraft can incentivize VA to expand into other international markets. It’s also good for the sector meaning more opportunities for pilots, crews and engineering positions. In the short term that does mean QR is probably profiting more from the wet lease arrangement compared to a typical JV where VA does its own flying but I think putting a time on it will give the business an opportunity to give this a go.

Not sure how much 'control' VA have here. Given that it's only on feeder routes for QR, and not even on a route that has a lot of destination traffic of its own, and not on any other routes, and not with any VA crew/personnel involvement, and where QR has long been seeking an increase in its own traffic for its purposes, I don't see any real ownership or control from VA's side. So if say VA felt it desirable to operate a service to the Pacific or US with similar timing, I'm not sure they have any control on that.

As for profitability, I suspect there's more upside for QR than VA. As it will improve profitability across all other QR services, plus these codeshare bookings, while VA only gains from the additional direct bookings (non-codeshare), then subtracts its wet lease costs. Not sure how freight will go, given its again limited in its scope, so will mostly be shared.

 

[HS-TQE]

There's also the possibility the ACCC and/or the IASC may require QR/VA to carry possibly two (maybe three) VA FAs per wetleased QR/VA service to DOH as part of the application, similar to how EY and HU had FA representatives (in addition to their codeshares) on VA-operated services to AUH and HKG respectively.

 

[TheInsider]

t’s also good for the sector meaning more opportunities for pilots, crews and engineering positions. In the short term that does mean QR is probably profiting more from the wet lease arrangement compared to a typical JV where VA does its own flying but I think putting a time on it will give the business an opportunity to give this a go.

There is absolutely zero benefit for any Australian workers here currently in the minimal information that's been given out. The wet lease is written as just that, there are currently zero plans to use any VA 'aircraft' or any VA crew.