Borghetti attacks Qantas 'leg-up'

Virgin Australia boss John Borghetti has demanded the government offer it the same level of support as it gives Qantas in light of suggestions it will guarantee the national carrier's debt or buy a small stake.

In an attempt to head off what he described as a "significant leg-up" for Qantas, Mr Borghetti has sent an open letter to the government in which he said the country needed two strong airlines.

"If Australia truly wants a level playing field, then any measures that the government plans to take to support Qantas should be offered to Virgin Australia," he said.

He took exception to the Labor government offering a so-called "letter of comfort" to Qantas in August, which helped the airline reassure credit rating agencies. Qantas was at risk of losing its investment-grade rating, which threatened to raise its cost of borrowings by more than $100 million.

"If Virgin Australia had been offered the benefit of such a letter, it would have enabled us to achieve superior outcomes," he said in reference to raising fresh capital.

Mr Borghetti said financial support would make the "playing field even more distorted", warning it would return Australia to the months after the collapse of Ansett when Qantas had a near monopoly. "What it means is that they are able to pursue continual attacks on us without fear of financial detriment with the loss of their rating," he said. "I have never believed in handouts from the government."

He described the likely response from the government to Qantas' request for assistance as "very fluid".

Qantas has been emphasising to senior ministers the urgency of its predicament, but Coalition sources say the airline's hopes of a resolution before Christmas appear optimistic.

The most likely options involve the government offering Qantas a similar debt guarantee to that which it gave the banks during the global financial crisis, or buying a stake of up to 10 per cent in the airline.

While Qantas believed it was at a disadvantage, federal Transport Minister Warren Truss said on Friday the government did not want to be in a "position of being bankers for airlines, nor are we prepared to fund a market-share battle between our major airlines". Mr Truss stopped short of revealing whether the government would give Qantas the same level of backing as the previous government gave Australia's banks during the global financial crisis.

After calling for a national debate, Treasurer Joe Hockey insisted the government would "carefully consider all the options" but would not be drawn on whether it would pump money into Qantas.

Macquarie Equities analyst Ian Myles said a guarantee would improve the quality of Qantas' balance sheet but would also highlight in investors' minds the challenges the airline faced in domestic and international markets.