The public stoush between Virgin Australia and Qantas Airways is starting to get ugly, with the latest development a threat of legal action from Virgin.
According to one commentator, the feud suggests the duopoly in Australia’s skies is not short on competitive tension, while another scribe wonders whether the history of the two airline bosses has added more spice to the fight. Either way, the battle is far from over.
Meanwhile, Treasury Secretary Martin Parkinson sides with the Abbott government on the debt ceiling in what one commentator sees as a sign of improved relations between the former subject of Coalition criticism and his new boss. And elsewhere, talk of a slowdown on the Fed taper has several jotters worried.
First to the intense public warfare between Virgin Australia Holdings and Qantas Airways. The Australian Financial Review’s Jennifer Hewett mulls the history of Qantas chief executive Alan Joyce and Virgin counterpart John Borghetti, and can’t help but sense genuine animosity between the two.
“They are clearly both intent on damaging each other’s flight speeds and manoeuvrability – and possibly even encouraging a flame-out. Naturally, this could have nothing to do with the fact that Joyce was chosen as Qantas boss over Borghetti, a long-term Qantas executive, who then moved on to lead Virgin. It’s all about the company and investors and customers, right? But the history does seem to add a certain personal intensity to the professional struggle.”
No one could really blame Borghetti for having a chip on his shoulder, though shareholders will hope emotion doesn’t rule over common sense. For now, it appears he does have Qantas on the back foot.
But Fairfax’s Elizabeth Knight thinks it’s pure competitive tension, rather than personal history, that has led to the public war of words.
“Some think it is personal between Joyce and Borghetti, who missed out on the top job at Qantas. But the war smacks of concern (or even fear) from the Qantas camp – tinged with desperation … To retain its 65 per cent market share Qantas will need to match it [Virgin’s increased capacity] – at a time when demand is sluggish and requires fare discounting. This has crushed Qantas' yield.”
The commentariat doesn’t believe the fracas will actually lead to legal action, but The Australian’s John Durie still views the appointment of legal ace Leon Zwier to the Virgin board as a shrewd move. If Virgin doesn’t fight back, Qantas just may get some concessions, albeit not on Virgin’s latest capital raising, as it is seeking.
“The Zwier appointment shows the Virgin board is keen to ensure Joyce does not step over the line in his attempts to once again use his cyclical financial misfortune to re-write history and the rules,” says Durie.
Business Spectator’s Stephen Bartholomeusz, on the other hand, argues that the episode signifies surprisingly strong competitive tension for a market duopoly, but he wonders just what the hand wringing from Qantas is really about. Does Joyce really expect to get anywhere with Canberra?
“It isn’t clear what Joyce expects to gain from his lobbying, other than an aggressive response from Virgin. The federal government isn’t going to intervene in the raising ... Virgin needs the capital and the government needs it to be a strong and financially stable competitor to discipline airfares. It is also unlikely that the government would amend the Qantas Sales Act, given that the practical benefits for Qantas would be modest at best and there would be no political gains from relaxing the foreign ownership limits.”
For all we know Joyce could have an interest in media assets and simply be trying to drum up some news and ratings. But perhaps his true intention is to draw as much attention to the fact that Virgin is majority foreign-owned. This enables the national carrier to go harder on a patriotic tone in any marketing messages, not that it has ever been shy in doing that.
In political and economic news, Treasurer Joe Hockey has received a significant boost to his debt ceiling argument from Treasury Secretary Martin Parkinson, according to Fairfax’s Malcolm Maiden. It appears Parkinson and the Coalition have made a lot of progress in their relationship, with the treasury secretary the subject of significant criticism from the opposition during the last term of the Labor government.
For The Herald Sun’s Terry McCrann Parkinson’s support of lifting the debt ceiling to $500 billion was a significant admission that Treasury continues to be too optimistic in its forecasts. McCrann believes the bigger issue, however, is US Federal Reserve chief Ben Bernanke’s latest statement, which shows no sign of a taper anytime soon and is therefore setting us up for a financial implosion.
The AFR’s market columnist Philip Baker is also worried about the future direction of the economy given the continued flow of cheap money, but for now, Bernanke is the market’s best friend.
The Australian’s David Uren and the AFR’s David Bassanese contemplate the funk within the global and local economies. For Uren, the prospect of prolonged, Japan-like growth stagnation is starting to look like a reality around the globe. Bassanese, on the other hand, delves into the housing sector’s growth and says it will do little to insulate us from the mining investment downturn.
Elsewhere, the eagerly anticipated financial inquiry has its leader, with David Murray chosen to head up operations. For the AFR’s Andrew Cornell, the appointment is a mistake as Murray’s close links to the industry damages the credibility of the inquiry. Cornell’s colleague, Chanticleer columnist Tony Boyd, is less concerned about the appointment and instead focused on the immense potential of the inquiry, particularly with regard to super.
Business Spectator’s Bartholomeusz considers Murray Goulburn’s latest manoeuvres to wrest control of Warrnambool Cheese and Butter Factory, and finds there may yet be a long way to go in the tussle.
And finally, The Australian’s Rowan Callick looks at the opening path for co-operation between Australia and our three biggest markets – China, Japan and South Korea. With new leaders in place within all four countries, the prospects for free trade agreements – which are being pursued ferociously by trade minister Andrew Robb – are improving.