Virgin warns government as Qantas pleads for help
The increasingly-likely prospect of Qantas receiving a government handout has been attacked by Virgin Australia who declared that any financial assistance would help “reinstate their monopoly”.
Treasurer Joe Hockey yesterday signaled that the federal government is prepared to come to the aid of Qantas and offer a debt guarantee. Changes to the Qantas Sale Act, which limits foreign ownership of Qantas, have also been flagged by Prime Minister Tony Abbott.
As news emerged of the government’s sympathetic approach, Virgin issued a statement insisting that Qantas’s financial struggle was entirely of its own making. While not objecting to any change to the Sale Act, any cash bailout would be a slap in the face to other airlines, it said.
“This would be to the detriment of the entire industry, including the smaller regional carriers. Any such guarantee should be given to all players,” Virgin said. “Qantas are in their current financial position because of their loss-making strategy of maintaining 65% of the domestic aviation market at all costs. We believe this is at the detriment of the entire industry. Any form of government assistance to Qantas is a means to enabling them to reinstate their monopoly.”
Virgin argued that Qantas already has “significant advantages” by virtue of its dominant position in the market. It also receives the majority of federal government travel spend, has assets that far outstrip Virgin, cash reserves, a superior credit rating and a larger fleet, Virgin said.
Hockey said Qantas’s request for financial assistance met several criteria. They include existing restrictions of the business imposed through the Sale Act, that it’s a national service and is operating in a business environment where “other sovereigns are engaging in direct competition to the massive disadvantage of an Australian business”.
While Qantas chief executive Alan Joyce has acknowledged there is no political will to change the Sale Act – which limits foreign ownership to 49% – Tony Abbott suggested earlier today that there was, in fact, a need to unshackle Qantas.
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