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Qantas’ CEO slams Virgin foreign investment deal … but does he have another agenda?

November 19, 2013 Aviation, Headline News 1 Comment Email Email

egtmedia59In report in Monday’s Sydney Morning Herald, by Phillip Coorey and in the Australian Financial Review, Qantas CEO Alan Joyce slams the investment in Virgin by foreign airlines, saying that it could see Qantas undercut. 

Mr Joyce has demanded the federal ­government halt a $350 million foreign capital injection into Virgin Australia Holdings, claiming it is the “final act” by “predatory” state-owned airlines to undercut the national carrier, cripple it domestically and internationally, and take over its routes, according to The Australian Financial Review.

In what is described as a searing letter to Prime Minister Tony Abbott, Transport Minister Warren Truss and all state governments, Mr Joyce said the situation also compounded the disadvantage Qantas experienced from the restrictions imposed by the Qantas Sale Act.

He demanded this “outdated policy framework” be urgently revisited as part of any examination of the capital raising proposal.

He also said that Qantas’s immediate priority is Virgin’s $350 million capital raising announced last week which Mr Joyce said would “substantially increase” what he said has been a gradual foreign takeover of Virgin Australia and was designed to circumvent foreign investment restrictions.

He demanded it be “forensically examined” by the Foreign Investment Review Board as an acquisition.

The letter, a copy of which was obtained by The Australian Financial Review, says the $350 million raising from three state-owned airlines – Air New Zealand, Singapore Airlines and Etihad Airways – would increase the total ownership of Virgin by the trio from 63 per cent to 72 per cent.

Mr Joyce’s ultimate fear appears to be that the capital raising, “supported and largely underwritten by three foreign governments”,  is the latest in a strategy of subsidising Virgin so it can continue to undercut Qantas on profitable domestic routes until Qantas could no longer support its international network.

His other key concern was that ­Virgin Australia would soon be effectively owned by three foreign governments but Virgin International would still be designated an Australian ­carrier. This would give the three airlines, all of which compete with Qantas internationally, access to lucrative routes, or traffic rights.

This fear is reported to have been exacerbated last week when Virgin chief executive John Borghetti said the three airlines would be offered board seats.

Hang on though, let’s look at this another way!

Mr Joyce is vehement in claiming that the Qantas Sales Act and other foreign investment rules and hurdles be canned and why not, as they are an unfair restriction on Qantas.

If these hurdles were removed though, that would leave the door wide open for Emirates to invest in Qantas and let’s face it, the reality is that Emirates investing in Qantas is the only way Qantas and especially its international arm, will survive into the future.

With Qantas A380’s already operating into Dubai and on to London, I also predict that within a very short period of time the Qantas A380’s will not operate past Dubai, with Qantas passengers taking advantage of the multiplicity of ports Emirates has in Europe and also having experienced Emirates superior service, especially in Business and First, many it appears are choosing Emirates over Qantas for their future flights.

What do you think?

John Alwyn-Jones, Correspondent

Currently there is "1 comment" on this Article:

  1. Peter says:

    This looks like the Pot calling the kettle black. Joyce is demanding a forensic examination by the foreign investment review board. Hang on Alan, Virgin Australia (Virgin Blue) was never an Australian company, it was set up here by Sir Richard Branson and sold off piece meal. I don’t care who owns Virgin as long as it is successful and looks after it’s customers as well as shareholders and employees.
    As for that forensic examination, that’s what Nick Xenophon was calling for over the QF books, don’t stir the pot too much Alan as you might draw too much attention to what you have really done to QF in order to get around the Qantas sale act.

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