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How NSW and Victoria bounced Queensland into Virgin bid

written by Adam Thorn | May 13, 2020
VH-VBA Virgin Blue Boeing 737-700 - 1942009
VH-VBA Virgin Blue Boeing 737-700, shot in 2009 at Brisbane Airport (Craig Murray)

On Wednesday, Queensland’s government stunned the aviation industry by confirming it was bidding for Virgin Australia. State Development Minister Cameron Dick even bullishly declared the state was a “serious contender”. It leads to the extraordinary situation that the nation’s flag carrier – originally known as Queensland and Northern Territory Aerial Services – could have a nationalised rival in Queensland itself. But how much did a vicious public spat with NSW and Victoria play in the state’s decision to bid? Here, Australian Aviation charts the war of words between politicians and executives over the future of Virgin Australia.

Saturday, 18 April

The Palaszczuk government announced it would offer $200 million towards a national package to support Virgin Australia, but the deal would be contingent on other states and territories also chipping in. It would also require the business, then not in administration, to undertake debt restructuring as well as maintaining its base in Brisbane. Deputy Prime Minister Michael McCormack, who is also the federal Transport Minister, welcomed the offer, saying, “If we’re going to have two national airlines at the other side of this pandemic, all governments need to come together to ensure that is the case; we need a national response.”

Sunday, 19 April

NSW Treasurer Dominic Perrottet said his state had conducted “significant discussions” to provide financial assistance to Virgin. However, he hinted any deal would be contingent on the airline moving its base from Brisbane to NSW.  “If Virgin were to consider being a tenant in the Aerotropolis in western Sydney as that second airport comes online, that would be a very positive thing,” Perrottet said. “I raised that with Virgin over time. It’s obviously part of the discussions that we’re having at the moment.”

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Monday, 20 April

Queensland angrily hit back at NSW, with Minister Dick insisting the move would force 1,200 staff to move states to remain in a job. Minister Dick dramatically told NSW to “back right off” and said, “There is nothing more dangerous than Queenslanders with their backs to the wall.

“It’s a nonsense to think the Prime Minister would even consider a NSW plan to move the airline there.”

Tuesday, 21 April

Virgin Australia finally confirmed to the ASX that it had entered voluntary administration. Its board appointed Deloitte to handle the process but added that it would continue to operate its scheduled flights, including those underwritten by the government in order to help Australians return home after spending time in hotel quarantine.

Wednesday, 22 April

Victoria joined Queensland and NSW by seemingly throwing its hat into the ring, claiming it had considered making a bid and hinting an offer could still happen. But, like NSW, there were conditions attached.

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Victorian Treasurer Tim Pallas said, “We would expect to see more jobs come to Victoria. We are almost exactly identical in size to Sydney and in practical terms, we don’t have a major domestic carrier based here and that strikes us as a little unreasonable.”

Thursday, 23 April

Melbourne Airport’s chief executive joined in, saying that a reborn Virgin Australia should make the Victorian capital the cornerstone of its new network. Lyell Strambi said, “That doesn’t necessarily have to mean corporate HQ, though it certainly could.”

Strambi added there was an “ongoing conversation” about how to make a Melbourne move happen and claimed the city is underutilised in terms of its value as a strategic hub. “If a lean, fitter, stronger Virgin wants to rebuild, Melbourne has to be at the heart of the plan,” he said.

Queensland Premier Annastacia Palaszczuk responded, branding the pitch as “absolutely ridiculous”. She said, “Virgin’s headquarters are here, they should stay here and we will fight to keep them here because we need it for our regional communities.”

Brisbane Airport CEO Gert-Jan de Graaff also mounted a defence for the state, claiming his city has room to grow “in spades” compared with rivals Melbourne and Sydney.

“With a new runway opening in July, Brisbane Airport will be the only non-capacity constrained, curfew free capital city airport in the country,” de Graaff said.

Friday, 29 April

Minister Dick urged Virgin Australia staff to show their support for a reborn airline remaining in Brisbane. “Virgin staff are big players in the process as creditors with upwards of $400 million worth of entitlements,” he said. “The workers have made it clear through representatives, the Transport Workers Union, they would not support moving headquarters out of Queensland. At this time, the last thing Virgin staff need is the disruption and dislocation of an interstate move.

Wednesday, 13 May

The Queensland government announced it is bidding for Virgin Australia. “This is a competitive space, but Queensland is a serious contender and our discussions with the administrators have been making progress,” Minister Dick said. “We have been very clear. Two sustainable national airlines are critical to Australia’s economy. We have an opportunity to retain not only head office and crew staff in Queensland, but also to grow jobs in the repairs, maintenance and overhaul sector and support both direct and indirect jobs in our tourism sector. We saw the punishing increase to the cost of flights after the Ansett collapse, and this government will not stand by and let that happen again.”

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39 Comments

  • TD

    says:

    Virgin HQ could be anywhere where there is phone line or satellite connection and some computers. Virgin should also be renamed saving them alledgedly a $200M fee per year to Sir Richard. The biggest issue will be maintenance hubs as part of operational hubs eg key capitol cities. Right now the most active is Perth fof VARA ops which could very well be a seperate airline working against similar entities. How much it contributes to mailine Virgin only the bean counters know. As far as the execs go all they need is a round table in a major hub for face to face for higher level negotiations etc.

    • Mark

      says:

      TD. I have never heard of the $200m fee to Richard Brandson. Everything I have seen is $15m pa which sounds more feasible.

    • Dave

      says:

      yah VARA, used to be a separate airline called Skywest. Except corporate virgin stripped it of its planes (sent them over east) and routes and then went bust. Thanks VA!

  • Pappy

    says:

    I’ve got a solution for Virgin.
    Virgin actually own half of their 80 737’s and four of their five 777’s. The remainder of the fleet including all A320’s, A330’s, ATR’s & Fokker 100’s are all leased.
    In the wake of the 737MAX debacle and global shortage of available airframes as a result, the sooner this virus thing ends and the airlines begin flying again, the owned airframes will have a reasonable value on the open market to fill in MAX orders that never eventuated. Maybe even enough to pay their debts.
    Then what I’d like to see is Virgin wind right back to its original low cost carrier model and stick to domestic and NZ only. Get rid of all other international, get rid of business class, get rid of the lounges and get rid of Tiger Airways.
    Streamline the fleet back to the 40 leased 737’s only and enjoy the economies of scale of a single aircraft type. Get rid of the rest.
    Basically stick to your knitting, Virgin, with cheap, no frills air travel for the masses who don’t want full service – just as it was when you entered the market and shook it up.
    Stop trying to go head to head and compete against one of the most successful domestic, and overall airlines in the world in Qantas.
    You’ll never win that battle.

    • Dave

      says:

      i.e. stick with Tiger and get rid of Virgin!
      I disagree, I think theres some middle ground between JQ and QF they could pitch for. A more premium economy style front seat product and a full service economy without all the bells and whistles. I want to see a full service economy competitor for qantas, I dont particular like their snobbishness.

    • Ronald Spencer

      says:

      Own 40 of there planes like most cars in most driveways a finance company has a share

    • Barry

      says:

      I’m not sure all those so called owned aircraft are fully paid for. I have enjoyed many Virgin flights, however I was alway bemused at their claim of being a full service airline, especially when the food service was just a muffin and a water or coffee. Virgin was never a full service airline and agree they should just go back to basics and rebuild. A low cost airline would do well in pandemic times, especially if Tiger don’t come back into the mix. It’s just a shame Virgin was in such bad shape. Airlines are difficult to make profitable without government support but they had great marketshare. It could have been a resilient airline if it’s keepers were more careful. Bit of a concern considering their salary range!

  • Luke M

    says:

    How is BNE going to be “the only non-capacity constrained, curfew free capital city airport in the country,” SYD I understand but MEL has lots of room to expand if needed. In the master plan it shows in the near future for another runway let alone no curfew currently. What is de Graaff even talking about

  • Wally

    says:

    Queensland always seem to have their hand out for other state’s money, and they never seem to tire of (their own) cheeky ideas. Don’t seem to enjoy other states’ cheeky ideas as a condition of the latest handout.
    I’m loving it.

  • John

    says:

    Who would want to live & work in Sydney or mel when can in bne?

    Much much cheaper to live in bne & weather is also much better.

    • Linda Weaving

      says:

      Even worse – the NSW offer isn’t for them to use Sydney airport. It’s conditional on them basing themselves at a new airport at the back of suburbia, 1hr+ from the coast & the harbour! Where temps hit 48°C in summer & -5° in winter, known as the home of ‘bogans’ & poverty. All of Sydney’s air pollution collects there. No tourist attractions. Any airline would have to be insane to accept that offer!

    • Spike

      says:

      If a future Virgin wants public support as it re-emerges, it needs to cancel it’s order for some 30 B737 Max aircraft.

      • Alan Pace

        says:

        Yes. The MAX’s are on the travelling public’s NOSE & therefore ‘NOT ON!’ ps. check recent global surveys on passenger views on EVER flying on the MAX.

  • Kim

    says:

    With $90bn State debt, how can the Qld. Govt. possibly entertain another $200m? $90.2bn doesn’t sound much until you extrapolate :- $90,000,200,000 which Queenslanders have to repay – or will the present Govt. leave it to the LNP to repay. Might need Campbell Newman back to slash and burn to pay for Trad’s extravagance.

  • Ken

    says:

    Quite so. Brisbane has already finished its expansiom – parallel runway operations commence in July this year – unlike MEL, which is five and a half years from completion.

    BNE also has an airtrain from the city AND from the Gold Coast and between domestic and international terminals.

    It is also not way, way down the far, wet and cold end of a continent, and is closer to both LA and LHR than is Melbourne. Not to mention HKG and NRT.
    QED.

    • Guy

      says:

      MEL already has two runways N/S and E/W in operation and is curfew free. The new runway will provide 30 years of uninhibited expansion. Winter weather has no effect on Melbourne being the fastest growing city nor upon the airport which just won best airport in Asia Pacific.

  • Linda Weaving

    says:

    The condition of Perrottet wasn’t relocate to NSW. It was ‘become a tenant of the aerotropolis’. That’s because he is so desperate to drum up interest in an airport that’s located in the worst possible location for serving the flying public. So of course Virgin said no. That’s not as bad as Etihad at least. They publicly scorned the idea of even using it. When will politicians wake up and stop throwing good money after bad! Maybe the airline industry needs to give them some cold hard facts. Like, Sydney’s customer base is on the North Shore & Northern beaches. Whereas western Sydney has the lowest air travel demand because that’s where all the poor people live! ?

    • Scott

      says:

      Dear Linda,

      Airports & airlines aside, just what is it that you have against the Western Suburbs of Sydney? I live there and my last two international flights were with Emirates in business class. We are NOT poor “bogans” as you all seem to think we are!

      • Guy

        says:

        Well said Scott and I’m no t from Sydney.

    • Stu Bee

      says:

      @ Linda

      Clearly you have some dislike for Western Sydney? I also live in the Western Sydney region – I am not poor, I am not a bogan but if fronting up close to a million dollars for a home means I am all of these then I’ll wear it with pride.
      I hope you’d like to clarify what basis you make your claims on?

  • David Sellen

    says:

    Get real we don’t want it…haven’t you been listening to the public who live in the west….. and WHY SHOULD AUSSIES PAY FOR ANOTHER COUNTRIES AIRLINE ANYWAY…..

    • Dave

      says:

      but it wont be if queensland own it!

  • Dave

    says:

    but it wont be if queensland own it!

  • Bernard

    says:

    I can’t blame the State govts for having a crack cause if it works out they’re legends for doing it. IF Sir Richard doesn’t get enough backing and Wesfarmers or Indigo of Buffett (I know he’s made a statement but Aussie market is different in my view and two airlines can survive if they have their niches) don’t get it then I would suggest state govt super funds invest AS long as the reborn Virgin has new name and is tightly run-not doing the high cost competitive thing it’s current owners did. Changing HQs not as easy as it sounds, changing maintenance facilities is harder due to costs, but developing complimentary maintenance and offices in other states is possible-South Aust and West Aust both good options for weather reasons (except height of summer) as Qld for can have increased storms environment. My view anyway…

  • Bernard

    says:

    I like some of the other comments, Pappy’s in particular.

  • Bernard

    says:

    I’m surprised bout Sir Richard getting 200m in TD’s comments. Something ain’t right: did other owners screw up Virgin then without his agreement or has Sir Richard had brain fades along the way in some of his decision making? Sir Richard has sold off various cash producing assets (Virgin Mobile, Virgin Money, Virgin America) on what looks like his money pit idea of Virgin Galatic and both his last airlines are now gone/stuffed if he can’t help out as his brand name still on them. He should not expect help from UK govts/establishment due to the historical bad blood, it’s their revenge time now and some of them would like nothing less than them gone-sacked/redundant staff are collateral damage to them.

    • Frederick

      says:

      Branson’s owned EIGHT Airlines in his lifetime.
      EIGHT airlines that no longer exist.
      Says it all really.
      Good businessman??? Hmmm…….

  • Lechuga

    says:

    Still doesn’t make sense to use Brisbane. Melbourne should be the number 1 choice, everything in and out of Victoria goes through Tullamarine. If I’m flying to Queensland I’m flying directly to where I want to go not through Brisbane onto another flight. For example, if I’m in Victoria or NSW I can fly directly to Brisbane, GC, SC, Townsville and Cairns. And even a couple other places like Mackay and Toowoomba depending on the service. That alone is taking away from Brisbane services, you can argue “you can connect” but why would you? If virgin is to be a domestic carrier, it is the best place to start again. Or they could just leave it and let Qantas take the next biggest and fastest growing market in the country.

  • Dawso

    says:

    Why nothing about REX flying capital cities on this website, or I missed it?

  • Jack Chomley

    says:

    The aviation industry has changed forever, it’s only mainstream growth will be in airfreight.
    Many companies have discovered teleconferencing and will have reduced requirements for travel. In the long term FIFO will revert towards totally self contained mine housing as it was 40 years ago, better worker isolation from mainstream high density population areas. A mine can not afford a virus infection on site, could cost them millions.
    Large companies will buy bizjets for their internal use, again they will have control and more isolation from mainstream domestic air services.
    It will all be centred around minimisation of risk factors against potential infection.

    • Sandy Reith

      says:

      Jack your comment has much merit, private travel for all sorts of reasons, as well as the economy of business, will gain in popularity. A natural progression enormously boosted by the virus outbreak. General Aviation (GA) could provide a great many services and create thousands of jobs and businesses but in Australia it has become hamstrung by the most counterproductive, unworkable and money wasting rules. This bureaucratic trajectory, seemingly unhampered by realities, stems from the independent regulator CASA governing itself with virtually no Ministerial input. The decline of a once growing industry (our country most suited to take advantage of GA) is astounding when one considers the general population growth of what is supposed to be an educated and free enterprise first world country. This situation, grown over the last thirty two years is so bad that now some Australians are enticed to learn flying in the USA in spite of travel, accommodation and the exchange rate. We’ve lost much of the skilled specialist personnel and hundreds of flying school and charter services have closed. To cap the whole sorry saga, the low weight category was unwisely split off from mainstream GA inducing thousands into a category (Recreational Aviation Australia, virtually a government sponsored monopoly company in some ways in unhealthy competition with the remainder of GA) of very small aircraft often much less suited to Australian conditions. Strangely all of the above seems to escaped the consciousness of the mainstream media, even in aviation journalism it gets little attention.

  • Steve A

    says:

    I sent the then PM, Malcolm Turnbull a proposal to set up a Federally owned airline in 2016, because both QF and VA were not being run in the best interests of the nation. It showed how to build another airline with 2,000 direct jobs (30 aircraft per annum x 5 years), and 2,000 indirect jobs pa over a 5 year period of time. At a boost to the Federal government coffers of about $30,000 pa per new job created, the pay back period was remarkably quick. After I received my political “Dear John” letter back from Darren Chester, the then Minister of Infrastructure and Transport, I tailored it to fit a QLD operation and sent it to the Qld Government and received a thank you letter back from the QIC with a ‘Thanks, but we are not currently looking at an airline at this point in time ‘. My plan was also offered to John Borghetti when VA were doing their most recent $1 billion plus revamping, but he told me that it was too late, Steve, because the Board had already decided upon a plan of action.
    I recently wrote to every Federal MP and Senator and emplored them to nationalise both QF and VA, as both were so badly run and not in the best interests of the nation, the economy, for jobs growth, and for tourism growth. I even showed them a small part of my plan to grow the economy, jobs and tourism. That way, they could see for themselves that my plan would work. It is very different from the current VA plan. If any future purchaser of VA follows the existing plan being offered, then they will never beat QF, because QF can attack them at every opportunity. My plan was designed to beat QF and to even become stronger than them. VA could very well become the dominant carrier over 5 to 10 years. I also recently wrote to every Queensland MP too, urging them to purchase VA from the Aministrator and offered my plan to take the airline forward.
    Thanks to all of the MPs and Senator’s who bothered to read my letter and the tiny part of my plan that I showed them as a tempter, and to those who replied. VA doesn’t need to remain the runt of the litter, the underdog. It can become something very different if given the right direction. Even QF could be something spectacular itself with a change of focus. Either airline group could be making several billion dollars profits pa within 5 to 10 years, it just needs some refocusing on different things.

    • GM

      says:

      What’s your plan Steve? Let’s have a look.

  • Alan

    says:

    The biggest problem with government owning airlines is keeping them ‘commercial’ and at arm’s length from the rorts of politicians and their cronies.
    When Qantas was (federal) government owned, such cronies as Sir Lennox Hewitt were foisted upon them by the government of the day. Clueless as he was, it was impossible to keep him locked in his office, he practically lived in a first class seat winging around the world to personally open every obscure ticket office. His ‘first class’ expenses would have been greater than the airline’s profits

  • Alan Pace

    says:

    Yes. The MAX’s are on the travelling public’s NOSE & therefore ‘NOT ON!’ ps. check recent global surveys on passenger views on EVER flying on the MAX.

  • Steve A

    says:

    Alan, Privatisation hasn’t worked in Australia either. Look at all of the casualties. Ansett, Compass 1 and 2, Air Australia (Strategic), now Virgin, and Qantas itself was nearly down the gurgler in 2014 as well. Qantas shareholders have suffered badly too, with just over 8 cps average in dividends over AJ’s 11 year tenure whilst he has pocketed over $90 million. Thousands of Australian jobs are now lost to Singapore, Dubai, Abu Dhabi and Doha. We need to change that. The focus of many managers today is how to maximize their bonuses.
    And GM, whoever signs a strict confidentiality agreement with me, and an agreement to pay me for my ideas (not their ideas), that they want to use, can see how to make either QF or VA profits of $5 billion pa by year 10. I know that most people have fallen off their chairs by now and are rolling around the floor splitting their sides with laughter, but that is because they can’t see how to make it happen. I am not wanting any money up front, but only for my ideas that they use. I can’t make it easier for them than that, can I? So, why would you expect me to give away all of my ideas for nothing? I have already been shafted in the past. If you look at some of the things that I have criticized QF for in the past in the 2014 and 2016 Senate Inquiries, then you will see that they are happy not to pay me for my ideas that they use.
    And I approached Emirates to take a strategic shareholding in my airline back in 2012 before they did a deal with QF, and got shafted. And one of the ideas that they use today in their new first and business classes was in my proposal to them back in 2012. Their virtual windows was my idea to them to make every premium passenger get a window seat even if they were sitting in the middle. But they have taken it to the next stage of course. My original proposal was to have a side screen fold up and out of the arm rest and for side-mounted cameras to take real time images to be projected onto it. At the same time I proposed a “private jet” concept for them to fit into their A380’s. Business class would be arranged so that it could easily be divided up into sections. The private jet area could be made private with screens, and the area would have an integrated audio visual set up so that companies, families, sports team etc… could book it out completely. They could project their own things onto individual screens and hold classes or business meetings whilst in the air. Naturally they could choose their own personalised food and beverage services.
    So that is why I don’t announce my plans here. Other people will use them and I will get nothing once again. I have very different ideas in abundance.
    By the way, the latest proposal for any new buyer to purchase 9 B787-9’s to replace VA’s current long haul fleet is not in my plan for them as this is not the best option for them. I have other ideas. This idea for B787-9’s is just another QF look-alike idea. We really should be doing our own thing instead of cementing ourselves as a “QF me-too airline “.

  • neil Campbell

    says:

    Melbourne should be the choice if Virgin is to survive. It appears to have some major consortiums interested. Victoria would be ideal as the Airline could tap into both the Business and Tourism industry,plus the choice of 2 major airports being Tullamarine, and Avalon. Both airports have good maintenance facilities.

  • Linda Weaving

    says:

    Virgin will throw any offers by Perrotett to the winds. As if they’d want the bother of flying into an airport with no viable market base! They’d have to be idiots! Remember the comments from SAC? ‘Deeply uneconomic’. From Deutchbank ‘we would prefer the company to invest $500 million into [Sydney airport] than $1 into western Sydney airport’. Dr John D Kasarda ‘demand at WSA is very hard to predict, creating high risk, putting off investors’, Anbar Al Bakar (explaining why Qatar Airways won’t consider using WSA) ‘as far as I’m concerned, we need to fly in and out of an airport which is convenient convenient to the gene4al public’. As I said, Virgin couldn’t possibly choose to be tied into using that new airport.

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