Qantas calls for public review of Virgin plans

Virgin proposed splitting its international and domestic businesses into two separate holding companies. Since foreign ownership of Australian-based international carriers is capped at 49 per cent under the Air Navigation Act, splitting off the international business would allow unlimited foreign investment in Virgin’s money-spinning domestic business, which would be subject to no such cap.

But Qantas argues the reshuffle is essentially a charade since the new international business, to be known as Virgin Australia International Holdings (VAIH), would still be serviced, managed and funded by the domestic business, Virgin Australia Holdings (VAH), effectively giving a potentially foreign-owned VAH control over the international spin-off.

“Once the proposed structure is implemented, there is nothing preventing VAH from becoming wholly owned by foreign shareholders,” Qantas general counsel Brett Johnson wrote in the airline’s submission. “Qantas is very concerned that the proposed structure is likely to result in foreign persons having effective control of the day-to-day operations of VAIH, in breach of Australia’s obligations.”

The move comes as the IASC considers Virgin’s request to transfer flight capacity on routes to Indonesia from VAH and VAIH.

Virgin, which has gained considerable ground on Qantas over the past year, says foreign investment has neared the 49 per cent cap in recent months. Opening the way to more foreign capital would allow the airline to expand its domestic operations and pose further threat to Qantas’ share of the market. Etihad and Air New Zealand are said to be among interested investors.

Qantas has used the proposed changed to push Canberra to relax foreign ownership rules imposed under the Qantas Sale Act, but the government has so far proven resistant to such changes.