ABC NEWS BREAKFAST
TUESDAY, 21 APRIL 2020
SUBJECTS: Support for Australian aviation industry during Covid-19; Virgin Australia.
MICHAEL ROWLAND: Welcome back this Tuesday morning, you’re watching News Breakfast, great to have your company. Virgin Australia is set to go into voluntary administration with up to 16,000 jobs this morning hanging very much in the balance. Australia’s troubled second airline has appointed accountants Deloitte to act as administrators, after the Federal Government rebuffed calls to bail it out. The airline is saddled with around $5 billion in debt and cash flow has collapsed because of tough Coronavirus travel restrictions.
LISA MILLAR: Virgin has already stood down 80 percent of its direct workforce and announced 1,000 redundancies in the past few weeks. Catherine King is the Shadow Minister for Infrastructure, Transport and Regional Development. She joins us now from her electorate of Ballarat in Victoria. Good morning and welcome to Breakfast.
CATHERINE KING, SHADOW MINISTER FOR TRANSPORT, INFRASTRUCTURE AND REGIONAL DEVELOPMENT: Good morning Lisa, nice to be with you.
MILLAR: Why should the Government bailout a company whose shareholders are all foreign-based and, quite frankly, was founded by a billionaire tax exile?
KING: Because it’s in the national interest to save 16,000 jobs and to ensure that we have two strong airlines in Australia. Back when Labor was in Government, we undertook a White Paper into Aviation. There hasn’t been one since. This clearly said that if you were going to have competition in the aviation sector, you need to have two strong players. Most of us lived through the collapse of an Ansett. We saw how long it took for Virgin Blue, then in those days to come up as a strong competitor to Qantas. It’s in the national interest that we have two strong airlines. Virgin is now 20 years in the Australian market. I’m not going to make excuses for some of the poor management decisions that it’s made in the past but it certainly is the best competitor we have with 16,000 people working in that sector. Now, the Government likes to say it’s not in the business of owning an airline. Well, the Government owns a railway – Inland Rail – which it has a huge equity stake in. It seems to keep forgetting that when it talks about not wanting to take an equity stake and save 16,000 jobs. I think the failure that we’ve seen, the failure of leadership we’ve seen from Scott Morrison on this issue is pretty astounding.
MILLAR: The fact that there are at least two private equity groups circling Virgin would indicate that it still is possibly popular with buyers. Might this not actually be a better process, even though it will be painful initially, you will end up with that stronger airline you’re talking about?
KING: What you’ll end up with is a weaker second player in the market. What private equity generally does with assets is it looks at them, strips them back down to the bone, in an attempt obviously to try and make them profitable. What that will mean in the case of an airline like Virgin, is it will see less routes. So those more profitable routes like Sydney-Melbourne, Melbourne-Brisbane, for example will stay, and what you will see is those regional routes, those less profitable routes to many of our tourist destinations shrunk back. You’ll see Qantas, potentially, again, become a much stronger player in the market and that competition with fares and competition on routes then disappears. Private equity isn’t benign in this space. It has attempted to take over airlines before. Certainly I’d be concerned that we’re not seeing the sort of strong player that we have in the market today competing against Qantas. I think it’s in the national interest that we do have that. We are in pretty extraordinary times. Who would have thought you would have seen the Government put our private hospitals into public hands. That we would have 6 million people having their wages paid by the Federal Government. We’re in extraordinary times and this required an extraordinary measure and extraordinary leadership from the Government, and unfortunately for the 16,000 workers, they’ve been failed by this Prime Minister.
MILLAR: What did you make of Richard Branson’s letter overnight to staff where he warns that if Virgin Australia disappears, Qantas would effectively have a monopoly and you all know what that means?
KING: Well, I think that’s exactly right. I think that Virgin Australia, the unions, aviation experts, Labor, and the workforce itself have been saying that for some time. We all lived through the Ansett collapse. We saw what happened in terms of air prices, we saw what happened on lack of competition on routes. That is what we’re heading for if the Government doesn’t look seriously, and talk with the voluntary administrators if they’re called in today, which we’re assuming that they will be, if it doesn’t talk with them and actually start to step up.
MILLAR: Catherine King, sorry to interrupt but it is a bit rich isn’t it, Richard Branson’s a billionaire who is spending his money on trying to get up into space at the moment, and the other issue shareholders are also very large foreign companies. Why should taxpayers be having to do the bailout?
KING: What we have seen right the way around the world is that aviation is in trouble. It was in trouble here in Australia before the Coronavirus crisis. We initially had bushfires, we saw a collapse in international tourism and a collapse in domestic tourism as well, with people staying away from many of our regional areas during the bushfire season. We then had Coronavirus, and that’s seen the collapse, very necessarily we’ve had travel shutdowns domestically and internationally, we’ve seen the collapse of aviation. It hit very, very quickly. We’ve seen similar governments, the United States for example, invest substantially in ensuring that its airlines continue. This Government has obviously decided that it’s not going to do so. All of the overseas airlines, the overseas stakeholders in Virgin have all said they are so busy trying to save the furniture in our own countries. Singapore Airlines, for example, saying they’re not able to invest here in Australia. They’re obviously saying that they do hope that it still can continue to hold its shareholder value, but obviously, is going to be up to the voluntary administrators what is left after this process.
MILLAR: Catherine King, thanks for your time.
KING: Good to talk to you.