Etihad-backed Virgin Australia in legal threat against Qantas

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Qantas boss Alan Joyce this week accused Etihad and two other foreign airlines that have major stakes in Virgin Australia of a “virtual takeover” of the carrier.

Qantas boss Alan Joyce this week accused Etihad and two other foreign airlines that have major stakes in Virgin Australia of a “virtual takeover” of the carrier.

A spat between two Australian airlines, one backed by Dubai’s Emirates Airline and the other part-owned by Abu Dhabi’s Etihad, has escalated to the point of lawyers being called in.

Qantas boss Alan Joyce this week accused Etihad and two other foreign airlines that have major stakes in Virgin Australia of a “virtual takeover” of the carrier.

He claimed Virgin’s $350m capital raising exercise, which would involve Etihad increasing its investment in the airline, was uncompetitive and would destabilise Australia’s domestic aviation industry, local tourism and jobs.

Joyce wrote to federal and state parliamentarians and emailed Qantas' 30,000 staff on Monday, urging them to lobby their MPs to intervene and block the capital raising.

Under the Qantas Sale Act, under which the airline was privatised, foreign investment in the airline is capped at 49 percent, while no such limit applies to Virgin Australia.

''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,'' the company said in a statement announcing its intention to pressure the government to block the equity deal.

Virgin Australia chief executive John Borghetti fired back, saying Joyce’s comments proved Qantas no longer dominated the Australian domestic market and faced tough competition from Virgin.

But on Thursday he went further, threatening legal action.

Borghetti said the airline had hired a commercial lawyer to assess whether Joyce’s comments had defamed Virgin’s board and management and whether they will have an impact on its capital raising and its share price, the Sydney Morning Herald reported.

Qantas dismissed the threats, saying it was comfortable with the statements it had made.

Etihad owns 19.9 percent of Virgin Australia, alongside Air New Zealand, which has a 24 percent stake and Singapore Airlines, which owns 19.9 percent.

The three carriers have agreed to inject $350m into Virgin Australia, which is struggling financially due a major restructure and new initiatives that helped it steal a significant proportion of Qantas’ domestic market.

The additional investment would increase the airline’s combined 64 percent to about 70 percent, according to the SMH.

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