Virgin clings on to bailout hope despite PM comments

written by Adam Thorn | April 3, 2020

Virgin Australia Group’s chief executive is still optimistic he can secure a bailout for his airline despite Scott Morrison playing down the possibility on Thursday.

When confronted with questions suggesting the country won’t hand the business a proposed $1.4 billion loan, Paul Scurrah said, “That certainly hasn’t been the message we’ve been getting from the government. We’re continuing to work on that package.”

Earlier, the Prime Minister told reporters aid would only happen on a “sector-wide basis”.

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On 31 March, later-confirmed reports emerged that the airline group was seeking a bailout that could be converted into ownership if it was not repaid in two to three years.

The speculation caused a halt to ASX trading.

So far, more than $1 billion of government money has been pledged to the aviation sector, but has been criticised for predominantly being a waiving of levies and fees.

Scurrah said allowing Qantas to operate a domestic monopoly would be a “disaster”, saying, “If we want to go back to year 2000s sales prices of Melbourne-Sydney for $800, then that’s what we need to be ready for.”

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Both The Sydney Morning Herald and The Australian have reported in the last week that the government is divided on whether to bailout the beleaguered airline.

A majority supposedly oppose a deal, despite also maintaining the importance of having two major players in the domestic market.

The chairman of the Australian Competition and Consumer Commission (ACCC) has already publicly lent his support to Virgin.

Appearing on RN Breakfast on 2 April, Rod Sims said, “We desperately need two full-service airlines when this is over. Whatever the government does is fine by me.”

Virgin Australia Airbus A330-200 VH-XFC at Perth Airport. (Keith Anderson)
Virgin Australia Airbus A330-200 VH-XFC at Perth Airport. (Keith Anderson)

The ACCC is currently considering a complaint from Scurrah against Qantas, which has been furiously lobbying against a package for its rival.

Speaking to Sky News last month, Qantas chief executive Alan 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.”

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16 Comments

  • Rod Pickin

    says:

    The P.M. may well be reluctant to give or approve any specific individual assistance to VOZ particularly as it is not Australian owned; coupled with the threat from QF for more astronomical funding; however I’ll wager that there are many meetings behind the scenes that will secure a beneficial outcome for both the company and our country. Virgin Australia will live on, it has to and I am thinking, with a new major shareholder, SQ?

  • Jeffrey Kaye

    says:

    What we definitely don’t want to end up with is a QANTAS monopoly as much as Alan Joyce would like that.

  • Dave

    says:

    aren’t we now paying his stood-down staff wages anyway? Tiny fuel bill, no landing costs. Just maintenance and finance. Surely they don’t really need $1.4bn if that’s the case. Its just a cash grab now.
    I agree they should be supported enough to stay afloat, but not to resolve all their financial issues.
    (else I’ll ask the gov’t to pay my mortgage!)

  • Lucas

    says:

    Don’t do it Scomo! You’ll regret it.

  • Teiemka

    says:

    So let’s get this right Qantas points out last week that Virgin’s running out of money pretty, so a complaint is lodged to the ACCC on competition grounds. This week Virgin asks for a government bailout because they are flush with cash as per their complaint to the ACCC?

    Money should not be given to any business, it should be given directly to the affected workers. Whatever happens to a business some other will take its place employing people even if it may not be at the same numbers.

    Virgin is a poorly run business, it’s shareholders won’t prop it up indicating there is no confidence in the business. So free market was imposed on us, let the free market run it’s course and government look after the affected workers.

    I’m not a booster for the mangy roo either, there are some very sharp practices over there especially this grubby acceptance of standing down of employees.

    Hand up for handout – zero contribution to the bailout kitty
    https://www.michaelwest.com.au/virgin-australia-holdings-limited/

    All big business tries to cosy up to government……
    https://www.michaelwest.com.au/the-club-will-virgin-australias-political-influence-deliver-taxpayer-subsidies-for-its-foreign-shareholders/

    Investing in Australia this quietly went away…
    https://www.michaelwest.com.au/another-bizarre-twist-in-now-aborted-virgin-read-chinese-plans-to-control-mega-flight-school/

    Free market running its course?
    https://www.michaelwest.com.au/virgin-australia-buy-the-business-dont-bail-out-the-shareholders/

    • Richo

      says:

      I would seriously suggest you completely disregard the article at Michael West Media Wittenberg by Anthony Klan –

      Absolute Rubbish!

      Factually completely incorrect as well.

    • james

      says:

      employees everywhere are obviously paid far too much. Forget about awards. Everyone should be doing the same amount of work for less pay, otherwise many will be doing no work for no pay. Who really wants to sit on the dole long term except for some surfers, who had little cash jobs on the side.

  • Chris

    says:

    Virgin Australia sent an email at 6.30om NZST 3 April 2020 to all 600 New Zealand staff that the base has closed forthwith and all position have been terminated immediately. This has suprised staff and their unions.

  • Paul

    says:

    Aussies always like to think they support the underdog…very admirable. What Virgin is though is a poorly run 95% foreign owned business which is now seeking a bailout from the Oz government because their investors don’t have the confidence to support it. This isn’t supporting the underdog, it’s stupidity.

    Competition is healthy and even though it isn’t a full service carrier, competition is what VA provides on some level. Any government funding should go to affected employees upon collapse not to bailout a poorly run organisation that’s had chance after chance to improve.

    I support the national carrier in its request for equality. If they made good business decisions over the years then that’s just bad luck for Pail Scurrah and his team.

  • Paul

    says:

    Lets hear from the VOZ shareholders first. After all they are responsible for the company.

  • terry

    says:

    don’t virgin own some aircraft ? Don’t think they are all leased ? If so, sell to a leasing company & lease back or sell to govt & lease back.

  • Herbal Hedge

    says:

    Qatar has been mysteriously appointed to carry out a lot of freight operations on behalf of Ausgov, they seem desperate to raise their profile here Quid Pro Quo ?

  • Craigy

    says:

    I agree with the PM that any aid will be sector wide not picking individual companies. From what I understand, Virgin is asking for a 1.4 billion loan post pandemic to aid with flight resumptions etc. This money is not needed right now but is planning for the future. My question is how much are its shareholders going to make available to support Virgin. The first stop for funding should not be the Government.

    Also I agree with Alan Joyce when he says the Government should not be picking winners and losers with funding. It should be available to all players in the sector. REX’s behaviour in demanding a bail out or else has been despicable and Sharp should hang his head in shame. He has done REX no favours.

  • TD

    says:

    Surely the major shareholders(owners) of Virgin should be talking to their own respective banks in their own countries (non of which are Australian). Same applies to another major regional airline owned by non Australian company. All of them send the profits overseas but aren’t willing to re inject them when required.
    The government (taxpayers funds) is not a bank especially for overseas corporations. We have higher priority things to sort out with the taxpayers funds which involves people’s lives. The government has supported the running costs of airlines via exemptions and pay the staff with follow on payments assuming the airlines keep their staff like their managements have promised . This should be enough.
    If the owners of Virgin were serious in keeping it they would do the right thing….source their own funding elsewhere wherever the profits have gone.

  • Geoff Bryce

    says:

    Why would the Australian Government give any company monies when that company, Virgin, has several other very rich owners, including Richard Branson, who is supposedly a billionaire. Shareholders would also need to shoulder the re-investment cost as well, before any hand outs were considered.
    Sure, Virgin Australia forms part of our Australian Airline structure, and we could never trust Qantas, the direct competitor to maintain “low” fares, if the only domestic carrier. So some sort of competition is required. But, that should not mean the Australian Government has to fund it. Like all business ventures, if there is money to be made, competition will be created. Interest rates are super low now, let the airlines, or new venture partners borrow it, like any other company.

    If the Australian Government were to hand tax payer monies to the airline industry, and not just their slight of hand deferment of charges, but real money , then some sort of fairness and business structure needs to be thought about. The standing costs per airline are so different, it will be difficult to determine a fair subsidy for each player, without giving them a financial advantage of their opposition. The Australian airline industry is more than Qantas and Virgin Australia. There are countless small airlines, and then the vast number of support companies.

  • China

    says:

    Virgin is owned by Richard Branson, let him bail out he’s own airline

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