Virgin boss fires back at Qantas capital objection

Virgin Australia chief John Borghetti has returned fire at Qantas for urging the Abbott government to halt its $350 million capital raising, emphasising that his airline has ended its rival's monopoly in the domestic market.

Virgin Australia chief John Borghetti has returned fire at Qantas for urging the Abbott government to halt its $350 million capital raising, emphasising that his airline has ended its rival's monopoly in the domestic market.

In an escalation of the battle between the pair, Qantas chief executive Alan Joyce has formally complained to the federal and state governments about the regulatory restrictions placed on its business but not Virgin's.

Qantas wants a review of the motives behind what it describes as "the virtual takeover of Virgin Australia by foreign airlines, and to prevent destabilising of the domestic aviation industry, local tourism and jobs".

But Mr Borghetti said Virgin was focused on bringing stronger competition to the aviation market, saying it had created more than 3000 jobs over the past three years.

"Fundamentally, the landscape has changed for ever, and it is no longer a monopoly," he said.

Federal Transport Minister Warren Truss would not be drawn into the fight on Monday.

Federal Treasurer Joe Hockey also declined to respond to Qantas' latest claims, although he indicated last year that a Coalition government would consider relaxing foreign-investment and business restrictions on Qantas.

While senior politicians stayed silent, Qantas gained support from both the county's peak union body and the long-haul pilots' union over its demands for an urgent review.

Australian Council of Trade Unions secretary Dave Oliver said the union movement supported Mr Joyce's calls for the government to intervene to "ensure the viability of our national carrier".

"It seems in this case that Qantas is fighting with one arm tied behind its back," he said.

Virgin's capital raising will allow its three major foreign shareholders - Air New Zealand, Etihad and Singapore Airlines - to increase their combined stake from 63 per cent to as much as 70 per cent.

Qantas' gripe is that different rules apply to its business. Under the Qantas Sale Act, foreign investment in the airline is capped at 49 per cent, total ownership by foreign airlines is limited to 35 per cent and a single foreign investor can buy no more than 25 per cent.

In the wake of Virgin's capital raising, Qantas said it had decided to state its concerns "as the national carrier about potentially damaging shifts in Australia's aviation industry".

It said the injection of more than $300 million into Virgin by "three government-backed airlines highlights the uneven playing field created by existing policy settings".

"If wholly privatised, Virgin's ability to receive potentially unlimited capital from its government-backed owners would seriously distort the domestic aviation market for the benefit of foreign interests," it said.

Mr Joyce will push these points when he meets both sides of politics in Canberra on Wednesday.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles