Qantas accuses Etihad of 'virtual takeover' of Virgin Australia

Qantas says it fears Etihad will destabilise Australian aviation market

Qantas Group chief executive officer Alan Joyce.

Qantas Group chief executive officer Alan Joyce.

The head of Australian carrier Qantas has accused foreign airlines including Abu Dhabi-based Etihad of a “virtual takeover” of Virgin Australia in what he fears will destabilise the country’s domestic aviation industry, local tourism and jobs.

Chief executive Alan Joyce, who launched an historic partnership deal with Dubai’s Emirates Airline earlier this year, has formally complained to the Australian federal and NSW governments, calling for regulatory changes.

The complaint relates to Virgin Australia’s A$350m ($325 million) capital raising exercise, in which Etihad, which owns a 19.9 percent stake in the company, and Virgin’s two other major shareholders, Air New Zealand (24 percent stake) and Singapore Airlines (19.9 percent stake), will participate in a rights offer.

The funding injection will help increase liquidity in the financially struggling airline as it spends up on projects designed to takeover Qantas’ valuable domestic market share.

The airline’s recent investments in business class and new wide-bodied aircraft for the lucrative Perth-Sydney route already have made a dent in Qantas’ performance.

Virgin Australia chief John Borghetti said Qantas’ attempt to prevent its capital raising with foreign carriers emphasised that his airline had ended its rival's monopoly in the domestic market.

Qantas has called for a review of the motives behind the capital raising.

The move will allow the three major foreign shareholders – all of which are government-backed - to increase their combined stake from 63 per cent to as much as 70 per cent.

Qantas fears the increased foreign investment would “distort” the domestic aviation industry to the benefit of those foreign investors.

Enhancing Qantas' displeasure is the fact it cannot pursue a similar path because different rules apply to its business.

Under the Qantas Sale Act, under which the airline was privatised, foreign investment in the airline is capped at 49 percent, total ownership by foreign airlines is limited to 35 percent and a single foreign investor can buy no more than 25 percent.

Qantas said the $350m injection 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,'' the company said in a statement.

Australian politicians have not commented on the issue, while unions have backed Qantas’ concerns.

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Posted by: Kshitij A

Alan you really got to look at your firm before you talk about for the welafre of your customers not your bank account.

Posted by: Desert Heat

Billy spot on. Henry K is the blind man who can see the rainbow. Unfortunately people like him have a very one track, defined agenda.

Posted by: Buk

Allan Joyce could not operate a free lunch successfully, considering how he shut down Qantas to boost his own ego because he did not want to pay a fair wage to his pilots. And lost much money for Qantas. I have had some of the worst travel experiences in the past traveling with Qantas, due to bad service. And will not travel with them again.
I advise him to improve to compete, not scream for more protection from the government, because charges by Qantas have been too high for too long. In comparison I have flown with Virgin has been good on time safe and reasonable priced!

Posted by: Billy

Alan Joyce is a frightened CEO....he has sold his sole to Emirates and was happy to reap the benefits but he now sees his domestic business under threat because his competitors are gearing up to offer a better product....and how are they doing it? By using foreign airlines money and know how. Why is it OK for Qantas to use Emirates but not OK for Virgin to use its own foreign airline partners. Might I suggest that instead of bleating to the government asking for protection he looks at his own company's offerings and competes to win. But can see that after years of a virtual monopoly such sharp, competitive business thinking must be hard. Man up or leave the ship.

Posted by: Desert Heat

I see...and what did you say when Etihad wanted to partner with you? Something along the lines of they offered you the bike before the Merc? I just wonder if your partner Emirates was allowed to do the same as EY has done with Virgin, whether you would be making so much noise...Or would you have turned a blind eye and merely whistled in the wind? Interesting..

Posted by: Billy

Henry...I am afraid it is you who does not see. It is not in Australia's national interest to prop up and protect an old legacy airline offering inferior service at higher prices because they have a government sanctioned near-monopoly. A shake up in your domestic operators is long overdue and the main beneficiary will be the customer who will get better service, lower prices and more choice. Qantas need to step up to the mark and make sure they are chosen on merit not protected due to inferiority.

Posted by: Henry K

No, you don't see. Apart from being unfair and againstAustralia's best national interests of keeping competition alive why should Virgin be allowed to cheat the system and get away with it ?

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