While the Federal Government has now committed over $1 billion in support for Australia's aviation sector, which was first and hardest hit by the coronavirus, it has ruled out nationalising any airlines.
Speaking at the unveilling of a new $298m package for regional carriers, Deputy Prime Minister and Transport Minister Michael McCormack (pictured above) said "it is not the government's intention to nationalise airlines."
"We want them to continue to be commercial operations. We want the aviation sector to come out the other side as best it can."
McCormack's decree follows speculation that the Government might initiate a taxpayer-funded bailout of Virgin Australia, which – following seven straight years of losses, with an $88m loss for the most-recent half-year of July-December 2019 – lacks the deeper pockets of Qantas when it comes to riding out the COVID-19 storm.
How long can airlines remain in business?
While Virgin had an estimated $1.1 billion of cash on hand at the end of 2019, Credit Suisse analyst Paul Butler has advised clients that Virgin could burn $860 million of that cash stash by June and could need a further $829 million next financial year.
In comparison, Qantas can fall back on reserves of $2.95 billion – with an additional $1 billion if needed – following a 10-year 'debt funding' loan worth $1 billion against seven of its Boeing 787-9 Dreamliners.
While there's broad support to keep the challenger flying in the name of competition and choice, Qantas CEO Alan Joyce has stressed that the Government "can’t pick winners and losers. Whatever aid is given to one particular company … has to be given to everybody in that sector."
All or none
Joyce subsequently doubled-down by saying that no lifeline should be extended to companies "that have been badly managed for 10 years”, later adding on a staff conference call that "governments are definitely not there to support a company that’s owned by Singaporeans, Chinese, Abu Dhabi and a British billionaire" (a poke at Virgin Australia's key shareholder regsiter which comprises Singapore Airlines, China's HNA Group, Etihad Airways and Richard Branson).
After Virgin Australia CEO Paul Scurrah complained about Joyce's comments to the Australian Competition and Consumer Commission, ACCC chairman Rod Sims noted that "we went into this crisis with two full-service airlines and we need to come out of this crisis with two full-service airlines."
McCormack's refusal to nationalise airlines is intended to put to rest ideas that the Federal Government could effectively take over Virgin Australia, whose share price now languishes at a low 7.2c.
However, with no end in sight for the coronavirus crisis, and a protracted recovery even when airlines do return to the skies, additional funding and support measures beyond the current $1bn bill can't be ruled out.