ACCC chairman publicly backs Virgin

written by Adam Thorn | April 2, 2020

The chairman of the Australian Competition and Consumer Commission (ACCC) has publicly lent his support to Virgin Australia, which is seeking a bailout to survive the coronavirus downturn.

Appearing on RN Breakfast, Rod Sims said, “We desperately need two full-service airlines when this is over. Whatever the government does is fine by me.”

The ACCC is also currently considering a complaint from Virgin chief executive Paul Scurrah against Qantas.

Advertisement
Advertisement

Sims added on the radio show that he believed airlines working together was the best answer “in times of war or pandemic”, citing multiple occasions where normal competition rules have been suspended.

This is the second time the ACCC has appeared to back Virgin. Two weeks ago, Sims said Qantas chief executive Alan Joyce’s “survival of the fittest” comments – relating to denying Virgin a bailout during the coronavirus crisis – weren’t appropriate.

Sims said, “Separate from the investigation – it’s obviously linked a bit – comments about the survival of the fittest aren’t helpful at a time when we do have a crisis and we need a more co-operative spirit to get through this.

“You would have seen today we’ve authorised the supermarkets to co-operate, last week we authorised the banks to co-operate, we’ve got a real crisis here and we need to be working together, not making statements like ‘survival of the fittest’.”

PROMOTED CONTENT

On 24 March, it was revealed that Virgin Australia’s chief executive wrote to the ACCC to formally complain about Qantas’ apparent attacks on his airline.

In the letter, obtained by The Sydney Morning Herald, Scurrah said Qantas’ actions “could cause immediate and irreparable damage to a competitive Australian air passenger transport industry”.

Scurrah continued, “Virgin Australia has seen widespread reporting of public comments from Qantas and its executive team questioning directly or indirectly Virgin Australia’s financial viability and encouraging [the] government to refrain from extending any government support for the aviation industry to Virgin Australia.”

He also accused Qantas of falsely briefing journalists that Virgin Australia’s cash reserves were running low.

Scurrah was thought to be referring to numerous statements by Joyce urging the government not to bailout Virgin.

Virgin Australia Airbus A330-300 VH-XFG arrives at Townsville. (Dave Parer)
Virgin Australia Airbus A330-300 VH-XFG arrives at Townsville. (Dave Parer)

For instance, speaking to Sky News, Joyce said, “It would be completely unfair to our sector. We’d be competing against the Australian government. Qantas couldn’t do that, it would be an unbalanced, uncompetitive environment.

“The government can’t pick winners and losers, the government has to be fair to every company. Whatever aid it’s giving to one company it must give to everyone in the sector.”

On Tuesday, it emerged that the Virgin Australia Group has asked the government for a $1.4 billion loan, according to later-confirmed reports that sparked a pause in trading on the ASX.

28 Comments

  • Rod Pickin

    says:

    There is ample evidence around to clearly show that QF via Mr. J. would do almost anything to close down VOZ, – Mr J. concentrate on keeping your own house clean and tidy and respect the fact we have a duopoly of full service airlines in this country; to my knowledge monopolies are either illegal or not allowed. By continuing your attacks on VOZ’s existence will only have the reverse public effect you intended.

    • Mick

      says:

      Well said Rod, absolutely agree.

    • David WW Olley

      says:

      Yes I agree, and I am usually a “Fan of Qantas”. We certainly don’t want to or need to, go back to the Olden Days of Ansett and TAA acting in unison and against the (travelling) public-interest.

  • Alan

    says:

    Well said Rod. Its time J was put in his place, seems he thinks he can rule the roost, as head of Qantas being an Australian owned airline. He just hates the competition!
    Virgin gives him a run for his money so wants to shut them down.

  • Rod;
    You seem t forget that we already have a number of other airlines in Australia operating fairly extensive services such as Network Aviation with 21 Aircraft, Alliance Airlines with 41 Aircraft and Regional Express with more than 60+ aircraft itself operating to 60 ofdd desinations. Yes the latter three airlines dont operate sunny new aircraft, but they still operate successfully. Also , the reality is that Virgin Australia has been operating for some considerable time at a loss, having made some really idiotic decisions. To be successful they should get out of the International business with their 777 and A330 operations. Thankfully they have closed down their loss making Tiger subsidiary and they have got rid of all of their Embraers (nice aircraft, but made their fleet operations more costly). They should cancel their 737 MAX order – as it is unlikely Australians will want to fly in them anyway and get rid of all AirBus A320s, just focusing on ANZ 737 single fleet operations.

    Personally I believe they should also offload their VARA operations as well, but perhaps this could continue as a seperate company if Virgin Mainline Under no circumstances should the Government bail out either Virgin or Qantas. It is not Government’s responsibilities to take a share in any individual company. They didn’t with the car companies nor the Stell Companies etc and certainly should not with airlines

    • Rod Pickin

      says:

      Hi Andrew, I fully recognise and understand that we enjoy a third layer of regional and niche airlines and they are needed, we should support them too!
      The current problem is Virgin and yes its recent history illustrates many thoroughly idiotic ventures and actions but, that is history, they have and or are in the process of moving on and the new management team are achieving results, bit hard to see at this time but true!
      Sure there must be fleet standardisations based upon the specific route structure/s – a mixed fleet within the same region/route structure is nonsense and Virgin are addressing that. Yes the B777 fleet was a “different” move at a trying time but I think it has been successful and if linked to Virgin Atlantic over HKG and or LAX, a good move. The A330 is a top, flexible long range machine and with good scheduling it can be well utilised within the Asia Pacific region specifically including Bali and another go at Phuket or similar. I do agree most definitely, give the B737Max the flick, consolidate, back to basics; most of all, stop trying to put more seat rows down the back in order to max the profit/reduce the loss. Time to think of the customer, give them something to remember and return for another journey; take a few rows out and increase the seat pitch. I heard a rumour that the other mob were having an area/zone with the ECY seat pitch was to be 36ins; is that reinventing the wheel?

  • Andrea Shearer

    says:

    There is more to this current dogfight. Back on 15/7/17 the Sydney Morning Herald reported that Richard Branson told them that Qantas CEO Alan Joyce was pushing the Abbott government for backing to flood the market with flights to drive Virgin out of business. So, there is the evidence that his aggressive stance on burying Virgin is alive in 2020.

  • Bernard

    says:

    Considering that a bailout of $1.4 billion would be greater than Virgins’s market capitalisation, I would prefer the government-could be a state government too to buyout Virgin. Then consolidate Tiger and Virgin names into a new company. Then when things are settled, sell 49% of it to recoup costs. Keeping 51% ownership allows control over where to base it-jobs, services, etc benefits follow.

  • Dave

    says:

    News outlets in NZ report some that side of the ditch are spouting that Air New Zealand should leap at the opportunity of filling the gap of Australia’s domestic passenger network should Virgin hit the wall and shut down. Others are more reticent as NZ taxpayers (who own 52% of AirNZ) should not risk such a move again (they still remember the Ansett debacle well enough).

    Vultures usually start circling when their prey looks weak. Not every one gets a feed though.

  • Ben

    says:

    1st time in Australian corporate history where a rival subtly attacked its competitor and discredited its viability. High time QF have a Aussie to run its top job and not a foreigner who has no loyalty to Australia.

  • Dean

    says:

    Beware the wrath of AJ. We all know he wants to dominate the Oz market and to hell with anybody else. The man does not believe in competition or a fair go for the flying public.

  • David

    says:

    Virgin Australia is not a full service carrier. There definitely needs to be two main carriers but you can’t deny Virgin has been poorly managed….& they shouldn’t be rewarded for that.

  • Wayne Lawrence

    says:

    Whilst I fully understand the government’s position on not wanting. a stake in VA, it seems counterproductive to me not to keep the existing competitive environment alive. The Government has since announced it would, if VA went under, make it easier for a new competitor to enter the Australian market. Just tell Mr J to pull his head in, manage the existing situation with the aviation sector by keeping the status quo. This will also protect the thousands, or millions of VA customers that have millions of Velocity points, as well as large sums of money in travel banks due to cancellations in air travel.

  • David WW Olley

    says:

    Yes I agree, and I am usually a “Fan of Qantas”. We certainly don’t want to or need to, go back to the Olden Days of Ansett and TAA acting in unison and against the (travelling) public-interest.

  • Paul

    says:

    What is the position of the international shareholders of VOZ. Surely they have some responsibility to provide funds to assist?

  • RK

    says:

    The Leprechaun swimming in his multi million dollar wages had best learn to keep his trap closed lest it come back to bite him on the ass

  • Doug

    says:

    All that AJ has done is to state the facts: VA hasn’t been profitable for many years, and has been poorly managed, so they’ll certainly struggle in this crisis. But why should their incompetence be rewarded with a bailout? Besides, they’re 90% foreign owned, so why should Australian taxpayers foot the bill? Of course, everyone wants two viable airlines, but that’s the point: they both need to be viable. If one’s not, another will replace it, exactly as Virgin did when Ansett collapsed. Finally, Rod Simms is a hypocrite; he believes we need a competitive airline industry, yet he’s perfectly happy to let the monopoly airports around the country charge as they please.

  • Virgin Australia is largely owned by a Chinese Corporation and I can see our Federal Governments reluctance’s to helping them out. Why doesn’t Virgin Australia ask the Chinese Company to ‘ball them out’. After all China is the country that caused the Covid-19 crisis.

  • AgentGerko

    says:

    The chances of Qantas working closely with Virgin are the same as the chances of a cat working closely with a mouse.

  • Julian Klan

    says:

    But why should Australian taxpayers bail out an airline 90% owned by the governments of China, Abu Dhabi and Singapore?

  • Nicholas

    says:

    I’d say that Joyce’s comments have already damaged any chance of the government not helping Virgin. Exactly the opposite to what he was looking to achieve.
    His comments on asking for $4.2 billion are regarded widely as absurd and have damaged Qantas.
    History tells us that Australia is best served by a duopoly that is relatively competitive.

  • terry

    says:

    Joyce lost a lot of people when he got political.

    Now he’s saying, we should support Virgin or we’d be left with very average Qantas.
    (for some strange reason, some people think Qantas is special – Virgin is just as much an Australian flag carrier. Am not sure of exact %s but Qantas is roughly 49% foreign owned & Virgin very roughly 80%, so Qantas is roughly 31% more Australian owned. Big deal. As far as I’m concerned, Qantas still has the stigma, of being the public service it was. Very bureaucratic & not very nimble. Qantas is bigger & currently has more cash reserves, but so what. Qantas could fall over, just as easily as Virgin, if this Corona thing drags out for more than a few months, although it seems, we are now on downhill side of slope, hopefully.

    The thing is, all the money must be in flying the golden triangle.

    If both airlines shrink, at least initially, it will surely be all routes except the golden triangle.

  • Stu Bee

    says:

    @Rod, whilst your comments are probably true and in business thats how you win – by removing the competition, but why should the Australian tax payer bail out VOZ when the majority of its problems are due to the inept management of over decade trying to emulate QF…

  • Rod St Hill

    says:

    There are some problems with a government bailout of Virgin. First, Australia would be subsiding the foreign shareholders. Second, although Virgin is not poorly managed, it is arguable that they made strategic marketing errors by competing for the business market and buying Tiger (which may well not survive the Coronavirus crisis as a separate brand).

  • Andrew Lovitt

    says:

    I agree. Qantas is a good airline but would not remain so if it had no competition.

    It was refreshing the way Rod Sims expressed it.

  • Alan

    says:

    Ben, that *may* be inaccurate and out of line. I’m sure you know many Irish born, and every other country born, who are as Australian as you.

  • Doug

    says:

    I see that after a full working day my post from this morning is still ‘awaiting approval’. Am I supposed to reflect an ‘approved’ point of view?

  • Monirul Sheikh

    says:

    ACCC has done the right thing as all FDI in this country deserves protection. It was unbecoming of Alan Joyce as Qantas CEO to be able to expose himself in that manner. Australian government should take this into consideration that a CEO of a nation icon/ Australian pride should not have acted in that manner. Qantas share holders should be able to understand that Alan Joyce acted in a very unprofessional way. Qantas as an Australian national brand has not done well and this airline is slipping away from its foothold. Qantas is not Qantas anymore as it was an aviation institution of huge pride. It produced some of the best professionals in the industry over many years. Today Qantas is not world class anymore in its aircraft maintenance standard. Today Australia missed that opportunity of becoming an aviation maintenance hub, because a corrupt group of executives did take its maintenance overseas, destroying the institution here, siphoning away a cut from maintenance bill is surely a part of it evidently, however we need to bring that lost pride. We need some one who can head that institution, not just the airline business itself. Government policy makers need to understand that precisely. We can not trust those greedy share holders who simply wants by hook & crook, selling Qantas long-term interest, making Qantas highly vulnerable, it is time for new leadership. Otherwise the virus that entered Qantas blood stream will make the recovery of its economics almost impossible.

Leave a Comment

Your email address will not be published. Required fields are marked *

Each day, our subscribers are more informed with the right information.

SIGN UP to the Australian Aviation magazine for high-quality news and features for just $99.95 per year