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New Change.org petitions, calling for the Australian government to assist Virgin Australia through the COVID-19 crisis, have attracted huge support from the Australian travelling public.
One petition, titled “Keep Virgin Australia In The Skies”, has already attracted over 30,000 signatures. It calls on Prime Minister Scott Morrison to “support Virgin Australia by offering the industry assistance it needs, such as a loan which it will pay back in 2-3 years to keep running as Australia’s second-largest airline”. The petition also says that, alternatively, the government could “provide Virgin Australia with a guarantor statement that will allow it to seek financial assistance elsewhere, but give the confidence it needs to achieve financial support”.
It is public knowledge that Virgin Australia has requested a $1.4 billion loan from the federal government as it struggles to survive through the current crisis. Analysts have previously predicted that Virgin could have enough liquidity to survive up to six more months, but this may not be enough.
Virgin Australia has now cancelled almost all flights, except for a six-weekly Sydney-Melbourne service, due to a severe lack of demand caused by the new government restrictions and travel bans. The flight suspensions will last at least until mid-June, but federal tourism minister Simon Birmingham said over the weekend that it could be months before state border restrictions are lifted, and has not ruled out international borders remaining closed beyond the end of this year. This could see a majority of flights suspended for a much longer period, but at this point it’s too early to call.
The federal government has already provided limited fee relief to Australia’s airlines. But, without further and substantial government assistance, it is unlikely that Virgin Australia will still exist when things return to “normal”. Unfortunately for Virgin, it happened to be in a worse financial position than Qantas when this unprecedented crisis began.
There are various reasons that some Australians, including some AFF members, believe that Virgin Australia should be left to die. One common argument is that Australian taxpayer money shouldn’t be used to bail out an airline with predominantly foreign owners. Combined, 91.25% of Virgin Australia is owned by Etihad Airways, Singapore Airlines, Nanshan Group, HNA Group and Richard Branson’s Virgin Group. The remaining 8.75% of Virgin Australia shares are traded publicly on the Australian stock market.
Qantas CEO Alan Joyce, meanwhile, has very publicly objected to Virgin Australia’s requests for government assistance. Joyce said that the government should not look after a company that has been “badly managed for 10 years”. And if Virgin Australia does receive assistance, Joyce says, Qantas should get triple the amount that Virgin gets to “level the playing field”.
Joyce has been outspoken in his calls for Virgin not to get government support, labelling the coronavirus situation a “survival of the fittest” scenario. (This even prompted Virgin Australia CEO Paul Scurrah to complain to the ACCC.) But Qantas is looking out for the interests of its shareholders, not the national interest or that of the travelling public.
On balance, Australian Frequent Flyer believes that it is in the national interest that Virgin Australia keeps flying. Yes, this could come at a cost to taxpayers. And yes, there are many other businesses around the country that are also struggling right now and could use this money. But if Virgin Australia collapses, the long-term effect on Australia’s economy, our tourism industry and the travelling public will be far greater than the cost of assisting the airline now through a crisis it has no control over.
If Virgin Australia fails, this will effectively leave Qantas with a monopoly in the Australian domestic market. This may suit Qantas’ shareholders, but for Australian flyers it will lead to significantly higher prices, fewer flights and a reduction in the quality of service. Those in regional areas will be particularly worse-off.
Even if you’ve never flown with Virgin Australia before, you have benefited from its existence. The full-service competition over the past decade has kept airfares at reasonable levels and prompted Qantas to improve its product significantly. As an example, many of us enjoy the Qantas A330 Business Suites on flights to and from Perth. But Qantas only decided to install this great Business class product on its domestic fleet because Virgin installed “the business” on its A330s. Before Virgin came along, Qantas had planned to run a 2-3-2 Business class configuration with recliner seats on its transcontinental A330 flights.
On a broader level, the entire country also benefits from a competitive aviation industry. The tourism industry directly and indirectly employs around 1 million Australians and tourism contributes over $60 billion to Australia’s annual GDP. Without a strong competitor to Qantas, fewer Australians will be able to travel and fewer overseas tourists will visit the country once borders are re-opened. The overall impact on jobs and our economy, in the long term, would be disastrous.
Of course, Virgin also employs thousands of Australians directly and has many Australian suppliers.
If Virgin collapses, it is unlikely that another airline would be able to fill the gap – at least, not quickly and not at the same scale. The aviation industry has extremely high barriers to entry, and following the COVID-19 crisis, it is unlikely that another airline would have the means to start and ramp up operations in Australia. On the other side of this, Australia will need a viable aviation sector to help our economy to recover quickly. A monopoly will be bad for everybody.
There are many different opinions when it comes to this, and you may disagree with this analysis. That’s absolutely fine. You can read what other Australian Frequent Flyer members have to say, and join the discussion, on the Australian Frequent Flyer forum: Keep Virgin Australia in the Skies
If you believe that the government should assist Virgin Australia, you may consider signing the Change.org petition.
