Assistance to Qantas is unfair, Virgin Australia says

Date
    February 13, 2014


Virgin Australia has hit out at plans by the federal government to extend a helping hand to Qantas, warning that financial assistance for the country's largest airline will be to the ''detriment of the entire industry''.      

Shares in Qantas surged as much as 8 per cent on Thursday after Treasurer Joe Hockey signalled that the government would guarantee the airline's new debt. The stock closed up 7¢ at $1.185 in its biggest day of trading since it warned in December that it faced first-half losses of up to $300 million.

Deutsche Bank analysts said Qantas' risk of refinancing existing debt would fall significantly and its financial profile would be boosted if it received support similar to that given to banks during the global financial crisis in 2008.


The analysts said it was likely to result in Virgin becoming a less aggressive competitor, which would close the gap between excess capacity and demand in the domestic market.

Virgin said its main rival had significant advantages, such as the majority of federal government spending on travel, and financial assistance would be to the detriment of the entire industry, including regional airlines.

''They are an airline that has multiple times our assets and cash reserves, a superior credit rating and a substantially larger fleet of aircraft,'' Virgin said. ''Any form of government assistance to Qantas is a means to enabling them to reinstate their monopoly.''

Virgin said Qantas was in its loss-making position because of its strategy of maintaining a 65 per cent share of the domestic market at all costs. ''Any such guarantee should be given to all players,'' it said.

But Qantas said its rival was ''playing by a different set of rules and they'd like to keep it that way''.

Some unions hit out at Qantas chief executive Alan Joyce.

The Transport Workers Union, which represents Qantas ground staff, accused Mr Joyce of pandering to the prejudices of the Coalition by ''saying that they're going to declare war on their own workforce''.      

TWU national secretary Tony Sheldon said Qantas was seeking taxpayers' money to prop up a strategy that had failed.

Australian Licenced Aircraft Engineers Association president Paul Cousins said the board and management needed to accept responsibility for the position in which Qantas found itself.

''Qantas management needs to come clean and open the books and have a good look at where the money is going,'' he said.    

But the Australian and International Pilots Association welcomed the likelihood of government assistance.

''A debt guarantee would be welcome and we are glad that the government is finally realising the importance of Qantas,'' AIPA president Nathan Safe said.

Read more: http://www.smh.com.au/business/assistance-to-qantas-is-unfair-virgin-australia-says-20140213-32n5p.html#ixzz2tEkeUvOk

QANTAS: THE FACTS

Since 2009:      

·      The Qantas share price has fallen by nearly two thirds, from $3.06 in July 2009 to $1.18 today.

·      No dividends have been paid to Qantas Group shareholders

·      Domestic market share has fallen and international routes have been cut

·      8,800 jobs have been lost

·      The airline reputation has been trashed with a global shutdown stranding hundreds of thousands of Australians.

·      The airline has posted its first ever half-year loss - $300m in the red.


Qantas Board response:      

·      Another 1,000 jobs to go

·      Australian flight attendants replaced by Thai workers on $247 a month.

·      Australian ground crew outsourced and casualised, reducing wages and airport security

·      Calls for repeal of Qantas Sale Act, so more jobs can be offshored.

·      Calls for a debt guarantee so management is no longer accountable for corporate failings

·      Siphoning millions from Australian domestic and international operations to prop up Jetstar Asia, an unsuccessful regional offshoot.

·      Higher executive pay – up 82% over last four years.

·      Boasts of future plans for industrial confrontation.