Virgin warns of price hikes under Qantas monopoly as bailout hopes stay alive

Virgin warns of price hikes under Qantas monopoly as bailout hopes stay alive

Mr Scurrah said allowing Qantas and its budget subsiduary Jetstar to operate a domestic monopoly would be a “disaster” for Australia’s economy, with destinations cut off and prices inevitably rising.“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,” he said.

Some aviation industry observers believe a Qantas domestic monopoly would not last long, given Australia is a lucrative market with few regulatory barriers to entry. But Mr Scurrah said every airline in the world had been financially devastated by the coronavirus, making the idea that another carrier would step in quickly to fill Virgin’s shoes a “fantasy”.

Qantas boss Alan Joyce has been lobbying against an assistance package for Virgin unless his airline gets one too, and has said government should not bail out a company mostly owned by government-backed foreign airlines.

Singapore Airlines, Etihad Airways, Chinese groups HNA and Nanshan, and British businessman Richard Branson together own 90 per cent of Virgin’s shares.

Mr Scurrah said Virgin was looking at other ways to raise money, such as fresh equity injections, including from new partners. He was talking to Virgin’s major shareholders, he said, but would not comment about their ability or willingness put more money into the airline themselves.

The loan proposal included a “safety net” to ensure it was repaid in two to three years, he said, which was that government could convert its debt to a majority ownership stake. Doing so would significantly dilute Virgin’s existing major shareholders.

Analysts say that with virtually no new revenue coming in, Virgin can last around three to six months before it burns through its remaining cash, while Qantas can last closer to 11 months.

The Australian Financial Review reported this week the government was set to reject Virgin’s request for assistance, paving the way for another airline such as Ireland’s Ryanair, to enter Australia.

Ailevon Pacific Aviation Consulting managing director Oliver Lamb said that if Virgin collapsed in any other time, an international carrier would quickly set up domestic services to compete with Qantas, with Singapore Airlines, Air New Zealand and Chinese carriers the most likely candidates.

“My concern would be that yes, the structure does support two carriers in Australia, but a second carrier entering Australia might be further away than people might like,” he said.

“All of them are going to be going through pretty tough times in the months ahead. So their ability to do that now is pretty hamstrung.”

Market analysts believe Virgin’s major shareholders are unlikely to help the airline through the crisis given their own financial woes caused by the coronavirus.

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