WEDNESDAY, 15 APRIL 2020
SUBJECTS: Support for Australian aviation industry during Covid-19; Virgin Australia; Ruby Princess debacle.
FRAN KELLY: Today the Morrison Government will announce more support for the aviation sector which has all but been grounded by the Coronavirus pandemic. Tens of millions of dollars will be spent subsidising the major airlines to keep them flying key capital city routes. But the Government is playing hardball when it comes to Virgin Airlines’ plea for $1.4 billion for a loan facility to stave off total collapse of that airline.
The Opposition says the Government should go even further – it should buy direct equity in Virgin to save up to 15,000 jobs and preserve competition in the skies. Catherine King is the Shadow Transport Minister. Catherine King, welcome back to Breakfast.
CATHERINE KING, SHADOW MINISTER FOR INFRASTRUCTURE, TRANSPORT AND REGIONAL DEVELOPMENT: Good morning. Good to be with you.
KELLY: So Labor is urging essentially the part-nationalisation of Virgin given the carrier has a $5 billion debt bill and has been in the red for the past five years. That equity would be almost worthless, isn’t it? Why would that be good value for taxpayers?
KING: Well, I think the first thing is you’ve got to go back to the Aviation White Paper that we put forward when we were last in government, about what sort of structure of the aviation industry best suits the national interest of Australia. It is not in Australia’s national interest to have a monopoly airline industry in Australia, because we know that when we did have that, it meant there was no competition on fares, there was no competition on routes. As a small nation, the fact that we have two major carriers underpinned by budget carriers, and then of course regional airlines across the country as well, means that we are well served.
This at the end of the day comes down to what is in the national interest. Is it in the national interest to allow Virgin to fail? My view very firmly is it is not. We have seen the Government already do some extraordinary things that we would never ever have thought to see a Liberal Government do in order to make sure the national interest in served, and we’re very clearly arguing we think it’s in the national interest to continue to have to carriers…
KELLY: …but at what cost? Because Labor’s idea as I understand it and the idea put forward by Virgin would be to sell down the equity and recoup the investment once the industry bounces back. But how long before a troubled carrier like Virgin could recover, it could be a long time, it could be years?
KING: Ok, sure, well here’s an example. The Government hasalready got some equity in a thing called the Inland Rail project, and it’s not expected to recoup its investment – it’s invested billions of dollars in that – and it’s not expected to recoup its investment for up to 30 or 40 years. I don’t think that would be the case in Virgin’s case. So it can’t argue that it does not have equity investments in other sorts of industries – it has done that within Inland Rail.
I think it is being extraordinarily intransigent when it comes to Virgin. I fail to understand why they don’t think it is in the national interest to have two carriers…
KELLY: …because it’s intervening in a marketplace, and preferencing one player against another, quite clearly. I mean, that’s why the Treasurer says he’s interested in a sectoral support package, not an individual one – you can understand that, can’t you?
KING: I can see what the Government is trying to say, but of course, when you look at projects like Inland Rail, that’s exactly what it has done. And it has also done that with regional aviation; it is supporting a number of regional aviation players directly through the $100 million dollar grant. It does go across the sector, but obviously it’s going to be applied differently as each different player is in a completely different position. And, some of those players – like Rex for example is 59 percent foreign-owned – so you can’t say that is an issue either.
Again, it comes down to what is in the national interest. Is it in the national interest to have to two carriers? Is it in the national interest to save 15,000 jobs? Is it in the national interest to ensure that we’ve got a strong aviation sector to support our tourism industry when it bounces back? And, it is going to be a long haul. They are the things we think are really important.
We do think it is possible for the Government to look at taking their equity stake, look at other lines of credit that they might want to extend and look at the mechanism by which they could do it. We’ve said an equity stake would seem to be sensible, so you get some return eventually to Australian taxpayers for that. But so far what we’ve seen from the Government is complete intransigence that it will not do anything to save this airline.
KELLY: Anthony Albanese says money shouldn’t be handed over unconditionally, and we’re talking about a significant amount of money. What conditions would you impose?
KING: Well, I understand that Virgin’s offered a convertible note of some sort, so that if it is not able to pay that money back within a certain time frame that then would be converted into equity shares, that then over time would be then be realised. Obviously that’s one option. Other options that the Government would need to have a look at include the length of time, and it could look at whether it takes an immediate equity stake in the company.
But, at this stage they’re not even talking about any of those things. Again, if they don’t do something, there is a very strong and real potential that this airline will fail, and fail fairly quickly.
KELLY: And if it does, Anthony Albanese seems to be suggesting that the Government would be open to letting foreign airlines based elsewhere fly domestic routes here. Is that what Labor is concerned about? And is there any problem with that?
KING: Absolutely. Because what you’ve got at the moment is a thing called cabotage – that airlines must employ Australians at Australian wages. You open the door to an international player; you remove the cabotage restrictions that could possibly open the door for Qantas as well. It means you don’t necessarily have to have Australians being paid Australian wages on both domestic lines.
That sacrifices, frankly, the Government is saying, well, we’re prepared to sacrifice the jobs of 16,000 Australians in an industry that is viable and has been viable at the expense of letting a cheaper airline come into the market.
The fact is that at the moment, the way international aviation is, they’re dreaming if they think someone like Singapore Airlines is going to come into the Australian market. At the moment they are all trying save the furniture of their airlines in their own country. So it could be years before that actually occurred either.
KELLY: Just briefly, we’ve got less than a minute to the news. Some in Labor have been pushing for a Royal Commission into the Ruby Princess fiasco. The New South Wales Government will announce the Commission of Inquiry today, which is a step down from a Royal Commission, but are you happy with that?
KING: I think it’s a good idea but we’ve got an immediate problem. We’ve got a ship with a thousand crew off the coast of Australia. 88 people were tested over the weekend; half of them tested positive for Coronavirus. If the Government doesn’t get in front of this, we’ve got another Ruby Princess health disaster literally on our shores. The Federal Government needs to actually deal with this immediately. The inquiries will happen, they’re important, but let’s actually deal with the problem we’ve got now before we again overwhelm our health system.
KELLY: Catherine King, thanks for joining us.
KING: Really good to talk, Fran.
KELLY: Catherine King is the Shadow Minister for Transport and Infrastructure.