Qatar Airways to acquire 25% of Virgin Australia

[justinbrett]

TK didn't have an interline with VA at the time they've started services to MEL, they were in negotiations with REX at the time for an FF partnership (which never occurred obviously) and had the QF group (QF and JQ) as their exclusive interline partner in Australia.

On further investigation, TK has full interline with QF and JQ, but only baggage interline with VA (no tickets).

I was mistaken that TK sells VA.

 

[RooFlyer]

Probably should care about Australian workers too, otherwise may as well shut down all of our airlines and open the market to the cheapest bidder.

Sure, and if the VA/QR wet lease was proposed to be forever, I would be against it. A couple of years, like Qantas would seem appropriate.

Pilots and cabin crew would be in the minority of jobs that the proposed increase in flights would sustain. I think you've argued in the past that most of QR's traffic is Australian outbound then inbound (ie little tourist impact), but sitting often in the cabin as I do, I'm not convinced about that. But even Aussie tourists use goods and services getting to, from and at the airport, from Uber to immigration officers to caterers onboard and at the airports. Airport hotels are plentiful, increasing in number and well attended. Someone must use them.

The only groups arguing against the proposed arrangements have very strong vested interests - and good on 'em, but hopefully the authorities will consider the wider economic and public interest.

 

[Saab34]

Convincing IASC that this counts as an Australian service is the hard part. Unions are already campaigning against it.

Still no submission on the IASC site.

Bit risky getting ACCC approval which is obviously likely, but leaving the IASC on the table while it goes through the process. Will be a nice big juicy submission against it from a major competitor, certainly can delay things.

Or is the thinking that they don’t even need to speak with IASC? Didn’t Virgin try that with Tiger in Bali?

 

[simmomelb]

Still no submission on the IASC site.

Bit risky getting ACCC approval which is obviously likely, but leaving the IASC on the table while it goes through the process. Will be a nice big juicy submission against it from a major competitor, certainly can delay things.

Or is the thinking that they don’t even need to speak with IASC? Didn’t Virgin try that with Tiger in Bali?

I'd say it has been submitted but not published yet, that's common.

 

[justinbrett]

Sure, and if the VA/QR wet lease was proposed to be forever, I would be against it. A couple of years, like Qantas would seem appropriate.

There’s nothing in the application that says it will ever become a dry lease. I did read a report that JH has refused to commit to converting the lease, as apparently that has already been called for by QF.

I think you've argued in the past that most of QR's traffic is Australian outbound then inbound (ie little tourist impact), but sitting often in the cabin as I do, I'm not convinced about that.

I don’t recall arguing that.

I think my argument was QR doesn’t really compete on price so more capacity may push others out of the market.

I do believe in the concept of growing the pie but the pie is already pretty big, with so many different options to get to Europe, so not sure all the capacity will be added, some will be reassigned from other airlines. I don’t really have a problem with QR doubling capacity, but don’t piss in me and tell me it’s raining, that’s all this wet lease is about.

 

[ben95]

There’s nothing in the application that says it will ever become a dry lease.

It’s not an ACCC concern. ACCC deals with business engaging in “cartel” behavior, in this case two airlines coordinating fare, schedule, routes. Wet-lease vs dry-lease is an IASC concern.

I did read a report that JH has refused to commit to converting the lease, as apparently that has already been called for by QF.

Why would JH do that publicly now? Doesn’t make sense to lock yourselves into a commitment if you can get away without one.

 

[HS-TQE]

Qatar Airways will become Virgin Australia’s exclusive interline, codeshare and loyalty partner headquartered in the Middle East or Türkiye (excluding interline for passenger re-accommodation purposes). Virgin Australia will not codeshare on the international flights of other airlines to, from or within the Middle East, Europe, and Africa, and will not acquire or supply any loyalty point accrual services or high value guest services, e.g. benefits such as lounge access provided to Gold members and above, with any airline headquartered in Africa or Europe.

So looks like SQ is the 'big loser' out of this, EY was already demoted to a unilateral partnership before QR announced their intentions to purchase a 25% stake in VA, so EY didn't have much to lose there.

Of couse, the alternative is SQ stumping up hundreds of millions (again) for a fourth go at the Australian domestic market through VA 2.0 or setting up (yet another) 'Australian' airline to 'overturn' (or compete against) that decision by QR, but considering the billion dollar losses across their previous three Australian investments (Air New Zealand-Ansett, Tiger Airways and Virgin Australia 1.0), plus declining an approach from Bain themselves (per the AFR reports) for a VA 2.0 stake suggests that Singapore/SIA is not willing to give a 4th go after being burnt on their NZ/AN investment, and having some responsibility for driving both Tiger Airways and Virgin AU 1.0 into the ground financially.

 

[Human]

There’s nothing in the application that says it will ever become a dry lease. I did read a report that JH has refused to commit to converting the lease, as apparently that has already been called for by QF.

Virgin and JH have been very upfront and -- gasp! -- honest about this. JH described it as VA putting their "toe in the water" (her exact words).

Putting one's "toe in the water" clearly means something like "testing it out without a clear commitment about whether, how, or to what extent to continue". It clearly does NOT mean committing to a dry lease in the future!

Calling it a "toe in the water" while at the same time committing to convert to a dry lease (or to purchase VA's own widebodies) is a contradiction.

 

[justinbrett]

It’s not an ACCC concern. ACCC deals with business engaging in “cartel” behavior, in this case two airlines coordinating fare, schedule, routes. Wet-lease vs dry-lease is an IASC concern.

Exactly as I posted above.

Why would JH do that publicly now? Doesn’t make sense to lock yourselves into a commitment if you can get away without one.

Sure, if she’s prepared for the application to be denied. QF included their promise from the get-go.

Virgin and JH have been very upfront and -- gasp! -- honest about this. JH described it as VA putting their "toe in the water" (her exact words).

Putting one's "toe in the water" clearly means something like "testing it out without a clear commitment about whether, how, or to what extent to continue". It clearly does NOT mean committing to a dry lease in the future!

Calling it a "toe in the water" while at the same time committing to convert to a dry lease (or to purchase VA's own widebodies) is a contradiction.

But it’s not really testing anything, is it? It’s just extra QR services. Of course they will be successful.

Has no bearing on whether VA could operate its own aircraft or even wet lease aircraft to other destinations.

Yes, this is all very transparent. It’s clear what this is all about.

 

[justinbrett]

So looks like SQ is the 'big loser' out of this, EY was already demoted to a unilateral partnership before QR announced their intentions to purchase a 25% stake in VA, so EY didn't have much to lose there.

Of couse, the alternative is SQ stumping up hundreds of millions (again) for a fourth go at the Australian domestic market through VA 2.0 or setting up (yet another) 'Australian' airline to 'overturn' (or compete against) that decision by QR, but considering the billion dollar losses across their previous three Australian investments (Air New Zealand-Ansett, Tiger Airways and Virgin Australia 1.0), plus declining an approach from Bain themselves (per the AFR reports) for a VA 2.0 stake suggests that Singapore/SIA is not willing to give a 4th go after being burnt on their NZ/AN investment, and having some responsibility for driving both Tiger Airways and Virgin AU 1.0 into the ground financially.

So VS is cut too.

SQ doesn’t seem cut to me, other than no codesharing to Europe.

 

[HS-TQE]

So VS is cut too.

SQ doesn’t seem cut to me, other than no codesharing to Europe.

As stated in a few posts above, it seems SQ will largely become a Asian feeder for VA, as UA is for the TransPacific/North America under a QR part ownership.

Although the comment on SQ being the 'biggest loser' on European feed stands to some extent, despite SQ's increases into DRW and CNS (instead of relying on VA).

VFF do still have access to the Velocity/Krisflyer transfer (for now) at a transfer penality for SQ/Europe access.

 

[elanshin]

Virgin and JH have been very upfront and -- gasp! -- honest about this. JH described it as VA putting their "toe in the water" (her exact words).

Putting one's "toe in the water" clearly means something like "testing it out without a clear commitment about whether, how, or to what extent to continue". It clearly does NOT mean committing to a dry lease in the future!

Calling it a "toe in the water" while at the same time committing to convert to a dry lease (or to purchase VA's own widebodies) is a contradiction.

Thats "PR talk". There's no 'toe in the water' in aviation. That's called throwing money away or playing with other people's money. Half assed approaches just ends up failing. CNS - HND would be a good example of that as that was really just semi half assed parking of their use it or lose it situation.

So when JH says 'toe in the water ' that's really just PR spin. If VA really considered international seriously as I said upthread somewhere HND would not be given up to QF. HND slot would be a lot more of an easier slot to operate if they were serious about Int'l. They can only "dip their toe" so to speak because QR is footing the bill.

Now don't get me wrong as a company this is a great position for VA being offered something like this. And as long as it doesn't affect their other major partners its a net positive.

 

[justinbrett]

Wait, is SA cut too? Surely not.

As stated in a few posts above, it seems SQ will largely become a Asian feeder for VA, as UA is for the TransPacific/North America under a QR part ownership.

Although the comment on SQ being the 'biggest loser' on European feed stands to some extent, despite SQ's increases into DRW and CNS (instead of relying on VA).

VFF do still have access to the Velocity/Krisflyer transfer (for now) at a transfer penality for SQ/Europe access.

Velocity should still have full access to SQ’s network for reward flights right? It’s just revenue to Europe that will get cut.

Speaking of not making promises they don’t have to, VA has just ruled out further partnerships with about half the landmass of Earth (no more Europe, Middle East or African partners). Not sure they had to do that, but maybe that’s QR’s condition of investment?

 

[jase05]

Not sure they had to do that, but maybe that’s QR’s condition of investment?

People laughed when I said QR will absolutely control everything VA does from here on in.
There’s a new sheriff in town and even though it’s a minority stake it will effectively be a takeover as QR will be calling the shots going forward.

 

[SYD]

People laughed when I said QR will absolutely control everything VA does from here on in.
There’s a new sheriff in town and even though it’s a minority stake it will effectively be a takeover as QR will be calling the shots going forward.

We’ll have to see what changes *after* the sale goes through. This all sounds like conditions for the initial investment to have been put on the table.

With no sign of an IPO, Bain probably were ok if it meant lining their pockets.

TBH, it sounds like VA FF’rs are going to be losers in the long run in order for QR to get those extra slots via the back door.

 

[elanshin]

If QR is forcing VA to reduce UA/SQ partnership, I'd honestly say that's a huge net negative to the VA program.

Let's not forget that in a few years time QR will likely have very stiff competition from RX (Riyadh Air) as well. This read more of a benefit for QR, benefit for Bain and net negative for actual VA flyers over time.

 

[HS-TQE]

Definitely agree with the QR control sentiment but at the same time they are also not that stupid. Had QR decided to sent US passengers via Doha for example QR would've sent VA's North American passengers straight to their enemy QF.

At the same time QR doesn't have enough widebody aircraft to go beyond the proposed 4x daily out of Australia, likely ruling out any ridiculous suggestions posted by 'that poster' such as SYD-SFO on "VA operated by QR" which would likely see objection from their existing partner UA and likely rejection from USA's DoT.

 

[SYD]

If QR is forcing VA to reduce UA/SQ partnership, I'd honestly say that's a huge net negative to the VA program.

Even the QF/EK partnership excluded transpac (and some others).

 

[justinbrett]

People laughed when I said QR will absolutely control everything VA does from here on in.
There’s a new sheriff in town and even though it’s a minority stake it will effectively be a takeover as QR will be calling the shots going forward.

Rapidly devaluing VA status though. Not many partners left.

If you want QR join oneworld.

 

[Human]

But it’s not really testing anything, is it? It’s just extra QR services. Of course they will be successful

There's no 'toe in the water' in aviation. That's called throwing money away or playing with other people's money.

Fact: VA's services to Abu Dhabi failed.
Fact: QF discontinued its flights to Dubai (whether you want to call that a "failure" or not is debatable and probably depends on your definitions).

What those things tell us is that the success of VA's flights to Doha is not the "slam dunk" that some people seem to think it will be.

This is a risk -- yes, a calculated one, and a risk that will (in my opinion) probably succeed, but a risk nevertheless. I can't see why calling it a "toe in the water" is inappropriate.

Serious question to @justinbrett and @elanshin : in the light of VA's failed flights to Abu Dhabi, what makes you so certain that this time things will be totally different?