Virgin Australia CEO John Borghetti has lashed out at Qantas over indications that the Flying Kangaroo could receive government support to shore up its debt, accusing the airline of "trying to get a free ride" to hold their 65% domestic market share and "knock out" competition in Australian skies.
“This is all about Qantas trying to get a free ride, there is no doubt about that, in order to continue their 65 per cent line in the sand strategy which is determined to knock out the competition domestically in this country,” Borghetti said on the ABC Radio National network this morning.
The proposed government backing would be similar to the guarantee extended to Australia’s banking sector during the global financial crises and establish the Federal Government as an underwriter for Qantas' debt.
Not only would this lower the cost of future borrowings by the airline and potentially allow the refinancing of existing debt, but the show of 'sovereign support' would lower Qantas’ risk factor in the eyes of the financial market and potentially help it bounce back up from ‘junk’ status.
Borghetti maintains that any government assistance to Qantas should also be available to Virgin Australian and other Australian airlines such as regional carrier Rex – and should the Federal Government give Qantas a debt guarantee, he would be asking for the same support "within 24 hours."
However, Borghetti said he supported changes to the Qantas Sale Act which would allow Qantas to accept higher levels of foreign ownership and move more of its aircraft maintenance offshore.
Read: The Qantas Sale Act explained
“The Qantas Sale Act is outdated and it should be removed and there is no doubt about that" Borghetti said, but cautioned that "two wrongs don't make a right."
"Just because the Qantas Sale Act is wrong, making another wrong by providing a debt guarantee does not make the situation right."
Follow Australian Business Traveller on Twitter: we're @AusBT
David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.
Qantas - Qantas Frequent Flyer
17 Aug 2012
Total posts 2199
Two wrongs don't make a right, so right the wrong and fight it out fair and square.
My view is that Qantas should be freed of the shackles of the Qantas Sale Act but should not be provided government assistance. It has not been a government carrier for over two decades, and it should not return to being one. It's just "an Australian airline".
Then the ball is in their court, and it's high bloody time to fix a few things to keep themselves competitive and successful.
25 Sep 2013
Total posts 1242
Another great comment. Thumbs up.
01 Jan 1970
Total posts 0
I think the two issues are linked. I don't have so much of an issue with the debt guarantee when the airline is majority owned by Australians. Why should Australian taxpayers give a debt guarantee to assist an airline that is almost entirely owned by foreign interests? As long as the Qantas Sale Act remains in force and unlikely to be repealed through the Senate, I do not have any more issue with the debt guarantee.
Maybe my memory is fading, but when the Government guaranteed Ansett's debts to have the administrators continue flying, did Qantas complain? Ansett was, after all, a 100% foreign owned airline at the time.
28 Oct 2011
Total posts 645
i just wonder what JBs 'thoughts' would be if VA were contrained by EXACTLY the same ownership 'ACT' .... im guesssing he...and his bedbuddy SRB (that branson person) would kick up a fuss!! ...i agree with dear 'watson'
28 Oct 2011
Total posts 645
and a sidenote...i wonder what 'stance' JB would have if he was still on QFs payroll....he would be crying foul on behalf of QF!! lol ... whatever lines the pockets of those on the top of the pyramid!!
10 Mar 2011
Total posts 526
So purely out of curiosity on what people think....
If JB asks the government to provide the same backing to VA, wouldn't he be asking the Australian government to be backing a foreign airline (which is technically what VA is since they are majority foreign owned)?
21 Apr 2012
Total posts 3006
Just out of curiosity, if Qantas ever ends up in Ansett's position (i.e. broke), could the Federal government force the airline to be nationalised?
Or can Qantas reject help and perish?
I guess I am just curious to know if there is anything preventing Qantas from killing itself off and building itself up again free of the QSA, all under the glare of but completely helpless protectionist members of parliament.
It would be a complete PR disaster but quite containable given these MPs all rely on Qantas, not least their access to CL and would not have many alternatives.
Can they capitulate and put forth a private member's bill to strip the new entity (formerly Qantas) of its air traffic rights?
21 Apr 2012
Total posts 3006
Sorry! I meant retaliate, not capitulate! Freudian slip there...I kept visualising those dour faces in Canberra trying to sound like they're still in control, when talking to journalist about this!
Qantas - Qantas Frequent Flyer
25 Jan 2013
Total posts 240
I second, 'watson375'. There's something not kosher about companies that fight over red tape.
Remove the shackles and fight 'fare and square'. Otherwise it'll make it look like Qantas only one cause he ran crying to Uncle Tony.
07 Oct 2012
Total posts 1251
It is too late now, but I would have preferred a situation where domestic carriers had to be 51% Australian owned.
Qantas - Qantas Frequent Flyer
27 Jun 2013
Total posts 40
Personally, I have a different view on the situation...
As much as people can point the finger at Qantas, I'm thinking perhaps the previous government was too easy going on lifting the foreign ownership of Virgin - altering the balance of the aviation industry too far to one side in Australia?
Yes, Qantas have made some dumb mistakes and haven't helped their situation, but Qantas aren't unique in that they are struggling to make a profit now. Brindabella and Rex, etc, etc are all under pressure.
Perhaps the current government should reverse the extra allowances that Virgin wre given in terms of foreign ownership limits and this would create a more level playing field and help return the industry to some profit? (also doens't require a change to the QSA either!)
Food for thought anyway...
21 May 2012
Total posts 11
At this stage reverting back to 51% Australian ownership of VAH would probably only drive it into the ground (at the hands of a capacity flooding wannabe monopolist that has driven a number of smaller airlines into administration over the years). I'd rather the competition.
Qantas - Qantas Frequent Flyer
07 May 2012
Total posts 371
It is bit rich for Virgin Blue to want hand outs when they have 3 foreign airline with unlimited resources to prop up an unprofitable business, when QANTAS is limited in foreign capital it can raise.
21 May 2012
Total posts 11
Did I read a different statement? JB is saying that he is for the removal of the QSA shackles for Qantas; and that our airline industry should see everyone on the same conditions.
The issue is that Qantas doesn't really want to be freed from the QSA - because they want to claim a special level of 'Australianess' (despite offshoring/Jetstaring as much as they can) and they would rather a guarantee which would give them access to cheaper credit that isn't available to others.
I don't think the three foreign airlines are going to pump unlimited resources into Virgin while QF keeps asking the Government for more concessions. That pot has to run out at some point.
Qantas - Qantas Frequent Flyer
24 Mar 2013
Total posts 67
Boo hoo Branson and Borgehtti do you seriously expect them to say anything differently. Australia is one of the few countries that embraces free market policies and what has it done for our manufacturing industries. Some of you wont be happy until QANTAS is a burned out shell like what became of Ansett and guess what you'll then complain about what you have left more Compass mks 1 and 2 etc etc. You'll end up wingeing about Virgin as well. Unlike most foreign carriers QANTAS has heritage if we let that go then its as good as Campbells taking out Arnotts. Easy to complain for those of you who dont put your hands in your pockets to travel in the first instance. Some comments are really of a pretentious nature on occasions. AJ is actually adopting a smart strategy if he wasn't then Branson and JB wouldn't have reacted in the manner they have. Virgin will never be Australian at heart and regardless of what some of you think about QANTAS it always will.
21 May 2012
Total posts 11
What exactly is so 'Australian at heart' about Qantas these days under Joyce? Offshoring as much as is possible?; ploughing millions into failing Jetstar international franchises?; handing the QFi outbound traffic to EK for most of the country? I don't think Qantas has done much of late to cement itself as 'Australian' other than in marketing efforts (most of it myth).
And lets bag Brandon/Borghetti for having a whinge? Joyce wins the gold medal for the Olympic sport of whinging.
12 Dec 2012
Total posts 1030
I think a lot of what Borghetti say/does is because he is pissed off at the QF board for giving what should have been "his" job to Alan Joyce.
What would VA be doing now if AN had remained in operation and DJ never got that massive expansion allowed by the collapse? (though there are many people in Australia who think that DJ/VA started after AN collapsed)
09 Sep 2012
Total posts 139
It's always been hard to have much time for Borghetti, and so far as whingeing is concerned, he is well ahead of Joyce, who may well be more accomplished at that other pastime, whatever it is.
Hi Guest, join in the discussion on Virgin Australia CEO: "Qantas wants a free ride"