Usually mild-mannered Virgin Australia CEO John Borghetti has come out swinging in an interview about Qantas’s bid to receive a debt guarantee from the federal government.
Speaking on ABC radio on February 18, Borghetti labelled proposals by the government to offer a debt guarantee to Qantas as “bizarre”, adding that “if it wasn’t so serious it’d be laughable.”
“It’s really quite bizarre that a government would even consider such a move for a player that is the largest in that particular industry and a player that is anything from going under,” he said. “(Qantas is) a player that is three or four times bigger than its nearest competitor, is dominant in every single market segment, and has billions of dollars of cash in the bank. What people are getting caught up in is emotion rather than looking at the facts.”
Borghetti said what Qantas was really asking for was a “free ride on the tax payers” so it could hold its 65 per cent market share ‘line in the sand’ and thus continue “the dominance of Australia’s skies.”
“What this is about is three different things, and people are confusing the three,” he said. “The first is, it’s about the Qantas sale act, and I do agree with Qantas that it is an outdated act and it does need to be at least diluted if not removed. There is no argument with that.
“The second is Qantas’s performance, its financial performance, and its strength. And in terms of financial performance, if you look at history it will tell you that over the last decade or longer, Qantas has made not only billions of dollars of profits, but this is the first time that it has lost money in the front half of the year. And all of a sudden, it’s chicken little and the sky’s falling down!
“But then the third is the issue of government interference in a public company that effectively is helping the biggest player have an advantage over all the smaller players.”
Borghetti addressed criticism that, because Virgin has foreign shareholders in government-owned Air New Zealand and Etihad, that it must be backed by foreign governments. “If it is true that we are in indeed backed by foreign governments, which clearly it is not, then surely our credit rating wouldn’t be a couple of notches below Qantas’s junk bond.”
Borghetti also countered Treasurer Joe Hockey’s claims that Qantas deserves government support because is seen as an essential national service. “He’s wrong. He’s wrong in the fact that it isn’t just Qantas that can come to the needs of the Australian people. We are now in a position where we now have multiple aircraft – wide-bodied, narrow-bodied, turboprops…we’re expanding our network significantly.”
“The only thing that’s happened here is Qantas has lost some of its credit rating,” he added. “It’s been downgraded…well, welcome to the world of aviation! It is still a good rating compared to most airlines around the world, and it is certainly a rating that is a couple of notches higher than any of its competitors here in Australia.”