Qantas CEO Alan Joyce defended his public remarks urging the government not to bail out Virgin Australia, saying it would have been “moral hazard”.
Australia’s flagship carrier showed little sympathy when Virgin made her first appeal to government for financial aid in March, publicly urging the federal government not to bail it out.
“We were talking to the government, I think, like all airlines – of an industry package, and a lot so that the government would support the whole industry and not choose the winners or the losers,” said he declared to the program.
“And the government has always had the mantra that there were sectoral, sectoral and economic initiatives.
“And if you start choosing individual companies, giving them a bigger advantage and Virgin asked for $ 1.4 billion, three times market capitalization, it was essentially a nationalization of Virgin, which would have led to . And it could distort the market and create unfair competition in the future. “
“It is a moral hazard,” he said. “People are very reluctant. Many businesses, many business leaders are very uncomfortable with government getting involved in industries on an individual level, sector-wide, industry-wide , is something we all support. “
The episode reveals how barely six months ago, the aviation industry was preparing for an exceptional year.
Fuel costs were low, demand was high, and Qantas and Virgin Australia were both ready to launch a series of new routes to take us further and faster overseas than ever before.
Then the turbulence hit. As COVID-19 swept the world, travel demand plummeted before stock prices soon followed.
Today, the aviation industry is struggling to survive a storm that no one was prepared to face.
Within weeks of the COVID-19 lockout in Australia, our second largest airline raised their hands for help. In April, Virgin Australia was put under administration with nearly $ 7 billion owed to creditors.
Weighed in by seven consecutive years of annual losses and having received no bailout from the federal government, Virgin CEO Paul Scurrah entered uncharted waters with a multibillion-dollar cloud over his head.
He said as soon as he knew the government was not going to save the airline – he was alone.
“This is the biggest crisis ever experienced by the airline industry,” he said.
“We went to government early to make sure they understood that we had exhausted discussions with shareholders. When we talked to the government, we wanted it to understand that there were no other potential sources of capital.
In late March, Virgin Australia asked for $ 1.4 billion in government funding to stay alive until the end of the pandemic. But the money, says Scurrah, was never meant to be a “bailout.”
Asked about Mr. Joyce’s comments, Mr. Scurrah said that he “had always admired Alan’s fighting spirit”, but that he “should ask him” why he made these public comments.
“We weren’t asking for a bailout,” he said of Virgin.
“We were asking that an ostensibly Australian company, which had foreign ownership, be saved and eventually brought back to Australian ownership, through the mechanism we were talking about. We were asking for something that was refundable and that we could find a way to reimburse. “
According to the investigation, Mr. Scurrah made a final plea to the federal government in writing on April 20, which essentially fell on deaf ears when treasurer Josh Frydenberg said that “foreign shareholders with deep pockets” of the airline should be the ones to intervene.
“I knew then that we were alone,” he said.
“And I knew then that we had a long road ahead of us. We were all tired. We all worked 24 hours a day, 7 days a week, from 3 to 6 pm, to avoid resorting to voluntary administration. And I think it was sort of confirmation that all of the government aid was not going to come. “
Entering into voluntary administration, the airline called on Deloitte as administrator to find a buyer for the bankrupt airline.
It was not until June 26 that Virgin Australia was thrown as a lifeline, with US private equity giant Bain Capital taking the airline as its new owner.
It is understood that the private equity firm, which will complete the sale in August, plans to withdraw Virgin’s offer between that of Jetstar and Qantas.
“I think one of the consequences of going through the process we are going through, and ending up with new owners in a lighter form, is that we will be flying to fewer places,” said Mr. Scurrah.
“There is no doubt about it. And where we have withdrawn from these routes, it is likely that this creates in these circumstances, specifically for these routes, a monopoly situation. So we are aware of it. We prefer not to have this impact on the traveling public. “
Four Corners Grounded: Australia’s aviation crisis and the future of flight broadcast in its entirety on ABC on Monday June 29 at 8:30 p.m.