- Agreement would improve Virgin’s ability to compete over the long term
Staff of the Australian airlines, says local news sources, have raised concern on the proposed one-quarter stake in the Virgin Australia by Qatar Airways. It is however believed that the deal could open the door to a healthier competition and a stockmarket float.
“The agreement would improve Virgin’s ability to compete over the long term,” CEO Jayne Hrdlicka was reported to have said.
Qatar Airways Group intends to acquire a minority equity stake in Virgin Australia from Bain Capital, the airlines were reported to have just announced.
Subject to several regulatory approvals, the deal would enable Virgin to launch flights within a year from Brisbane, Melbourne, Perth and Sydney to Doha, connecting into Qatar Airways’ global network under a wet lease, – a wet lease which the report captures as involving one airline providing aircraft, complete crew, maintenance and insurance to another airline.
It is expected that the measured return to long-haul international flights would begin in mid-2025, three years after Virgin begins codesharing (which is a commercial arrangement whereby one sells seats on a flight operated by the other with each flight using their own flight number), with Qatar Airways.
The report adds that the deal will make the local airline more competitive, better value creativity – in terms of airfares and local jobs availability, reporting Virgin’s Chief Executive.
“This partnership brings the missing piece to Virgin Australia’s longer-term strategy and is a huge vote of confidence in Australian aviation,” Jayne Hrdlicka was quoted to have said.
The arrangement also provides Virgin and its stakeholders with the opportunity of realignment within the Australian Securities and Exchange as investors would be more than willing to open, once again new books with the airline, which was delisted in 2020 after going into administration with almost $7 billion in debt before it was taken over by US-based private investment firm Bain, sources said.
“An IPO (float) would hopefully see lots of Australian institutions and retail investors joining Qatar as shareholders in Virgin Australia,” Ms Hrdlicka was quoted to have told a local Teevision.
Transport Workers Union had however maintained, report states, that any float should involve an employee share scheme, captured as among several demands workers wanted addressed, so as to give them some comfort that their jobs and conditions of service.
“There are understandable doubts about this deal, particularly for cabin crew,” union’s national secretary Michael Kaine was quoted as saying.
“A commitment to respect is expected and necessary given Qatar Airways’ track record.”
Competition in Australia’s aviation sector, report disclosed, has been in the spotlight since the collapse of Rex Airlines, which had tried to challenge Qantas and Virgin’s dominance of east coast capital routes.
Qatar Airways, which is wholly owned by the Qatari government, says the investment proposal for a strategic alignment with Virgin Australia aims to achieve a collective ambition to deliver the best possible service and value to Australian passengers.
“We believe competition in aviation is a good thing and it helps raise the bar, ultimately benefiting customers,” Qatar Airways Group chief executive Badr Mohammed Al-Meer was quoted to have said.
“This agreement will also help support Australian jobs, businesses and the wider economy.”
The deal also leaves Bain Capital with 67.5 per cent of Virgin Australia, while the remaining shareholders – Virgin Group gets five percent, and the Queensland government gets 2.5 per cent.
News Sources