Qantas and Virgin Australia are engaged in fisticuffs over the contentious issue of foreign ownership, with Qantas CEO Alan Joyce sledging “predatory behaviour” by Virgin’s partners – airlines “supported and largely underwritten by three foreign governments”.
However, Virgin Australia boss John Borghetti reckons that Qantas simply can’t stand the rising heat of competition now the Flying Kangaroo no longer enjoys a near-monopoly in Australian skies.
The verbal volleys come as Virgin seeks to raise an additional $350 million which, as Australian Business Traveller previously reported, could see the airline’s overseas partners end up with a combined 79.8% in Virgin Australia’s parent company.
UPDATE: Qantas takes to social media, Virgin Australia ponders legal action against Qantas CEO Alan Joyce
Virgin Australia – but with 80% foreign ownership
Air New Zealand, Etihad Airways and Singapore Airlines are all likely to boost their stake by picking up new shares in return for contributing towards Virgin’s cash call.
Air New Zealand will pony up "between A$81 million and A$116 million", according to a statement from the Kiwi carrier, which now holds 22.9% of Virgin Australia shares and is keen to take that stake up to 25.5%.
According to The Australian, Etihad is looking at a maximum stake of 22.2% placing it just ahead of Singapore Airlines’ goal of 22.1 per cent. Both airlines currently hold an equal 19.9% slice of the pie.
Added to the 10% founding foothold of UK’s Virgin Group, this would see the four foreign airlines holding a combined 79.8% stake in Virgin Australia.
And that, says Qantas, is much too much.
It's a virtual takeover, says Qantas
In a letter sent to state and federal governments, Qantas CEO Alan Joyce called for Canberra to “fully examine the motives behind the virtual takeover of Virgin Australia by foreign airlines.”
Joyce wants the Foreign Investment Review Board to “forensically” examine the roles of Virgin’s overseas partners and also raised the spectre of several of those airlines colluding in a take-over of Virgin Australia.
“If wholly privatised, Virgin Australia's ability to receive potentially unlimited capital from its government-backed owners would seriously distort the domestic aviation market for the benefit of foreign interests” the airline said in a statement issued to the media.
Qantas is especially concerned about the injection of foreign cash into underpinning Virgin’s continued assault on Qantas’ domestic routes, which deliver a much-needed profit to offset the losses of Qantas’ international arm.
The airline also highlighted the ‘level playing field’ argument which sees foreign investment in Qantas capped at 49 per cent, with total ownership by foreign airlines limited to 35 per cent, under the Federal Government’s Qantas Sale Act.
Virgin Australia hits back
None of this cuts much ice with Virgin Australia, which CEO John Borghetti saying it’s all about Virgin bringing much-needed competition into the Australian market.
“Fundamentally the landscape has changed forever, and it is no longer a monopoly” he said.
“At the end of the day, we employ 9000 people, we’ve grown the business and done for lot of tourism in the country – as much as Qantas” added Virgin Australia spokeswoman Danielle Keighery
“If you go back to what this country needs, it needs competition and that’s what we’re bringing."
What's your take on all this? Should foreign airlines be permitted to maintain such high stakes in Virgin Australia? And if so, should Qantas also be allowed to accept overseas interests to the same level?
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