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Virgin Australia chief executive Paul Scurrah has called for "rivalry" to be put aside and for the Federal Government and the community to step in and back Virgin in the national interest.
Key points:
- Virgin Australia's boss is still hopeful the company can be given a $1.4 billion loan from the Federal Government, saying it is in the 'national interest'
- His comments came as union leaders and experts gathered in an industry roundtable aimed to raise pressure on the Government to act
- Superannuation heavyweight Garry Weaven said Scott Morrison's suggestion that super funds should invest in Virgin would be bad for members
On Friday morning, with private equity firms circling as part of a possible takeover of Virgin, there were last-ditch pleas from a roundtable with unions, academics, super industry experts and politicians including former treasurer Wayne Swan, for the Government to help save the struggling airline.
All participants urged the Government to step in and take an equity stake in the company, which is struggling to refinance a $5 billion debt pile, rather than leave it to the private market to deal with.
If Virgin cannot get shareholder or Government support, the company could soon enter into voluntary administration.
Prime Minister Scott Morrison, Treasurer Josh Frydenberg and Deputy Prime Minister Michael McCormack have repeatedly said the market, not the Government, should step in with a solution.
On Friday, Mr McCormack welcomed suggestions a private equity consortium was reportedly looking at buying Virgin Australia, reiterating that the Government wanted to see "a market resolution and a market solution for Virgin".
Mr Scurrah, who has repeatedly asked the Government to help the company with a $1.4 billion loan, said he was limited in what he could say while the company was in a trading suspension, but called for all players to "come together and link arms" in order to save the company from collapse.
"This is a national crisis, it's a global crisis, it's a crisis that this industry has never seen before," he told roundtable participants, including journalists, in a Zoom meeting.
"Rivalry should be put aside and the national interest should come first.
"We should make sure that the industry gets through this together," he said, noting that aside from Virgin's own 10,000 workers, thousands of Australian workers in supply chains also relied on the company's survival.
"Let's come together and link arms… so we can actually do the right thing by the country."
Virgin's chief operations officer Stuart Aggs spoke directly after Mr Scurrah, reiterating how crucial it was for the Government to throw the company a lifeline as it was now fighting to survive on a "day-to-day basis".
"We are clearly in crisis mode. We're an airline under significant scrutiny on almost an hourly basis," he said.
"Competition is important in the industry."
Shame to lose what Virgin has built: chief operating officer
Mr Aggs, who has worked in the airline industry for 20 years most of which has been at Virgin, said because of the trading suspension, the company's management was limited in the amount of information it could provide its concerned staff.
He said they were getting several emails from team members every day, but could only provide "vague answers", which was "very frustrating for them and very frustrating for us".
He said when Ansett collapsed it took Virgin Blue (now Virgin Australia) more than 20 years to establish itself as a true full-service airline competitor to Qantas.
Virgin Australia still now only held about a 30 per cent share in Australia's aviation market and was struggling to get hold in key corporate markets, which Qantas dominated.
Mr Aggs said Virgin had a team of first-class pilots with long experience in flying planes and it would be "an absolute shame" to let them go.
In his 16 years employed with Virgin, he had seen airlines make various decisions — "some of them crazy" — but it still would be a shame to lose what Virgin had built up.
Asked why Virgin Australia's part-owner, billionaire Richard Branson, would not help with a cash injection, Mr Aggs said he had no comment.
On Thursday night the Federal Government announced up to $165 million in support to enable Qantas and Virgin Australia to service key metropolitan and regional routes over the next two months.
Virgin, which had suspended domestic flights last week, said the new schedule would enable it to reinstate 200 staff, including pilots, cabin crew and ground staff.
The extra government funding came after the aviation industry argued that an earlier $1 billion industry support package did little to help the sector because $715 million of it was made up of waiving certain fees that were not charged when planes were grounded.
Expert rejects PMs call for super funds to stump up cash for Virgin
On Thursday night, Prime Minister Scott Morrison urged industry super funds to help Virgin Australia survive the coronavirus pandemic by stumping up cash.
But superannuation heavyweight and former chairman of global institutional funds manager IFM Investors, Garry Weaven, rejected Mr Morrison's suggestion.
He said the idea that transport super funds could back Virgin was a "furphy".
"I was a little surprised by the remarks of the Prime Minister on TV last night suggesting some sort of [super] industry fund bailout," Mr Weaven said.
"His government would probably be the first ones to kick the hell out of the trustees if they went down that path on the basis of the trustee law."
He said the law requires trustees of all the industry funds to make investment decisions in the long-term interests of their members.
And while super funds could take into account employment creation issues when deciding on investments, the focus needed to be on "excellent long-term returns".
Given Virgin's current major shareholders — which include Singapore Airlines, Etihad Airways, China's Nanshan Group and HNA and Sir Richard Branson's Virgin Group — were having trouble seeing a case to invest, he questioned why superannuation funds would be any different.
"I think that the Government clearly needs to think these things through a little bit more carefully," he said, urging it to help bail out Virgin.
University of Queensland professor John Quiggin said ideas held by Government ministers of neoliberalism and free-market capitalism — that the market can sort this out itself — did not hold during major catastrophes like the coronavirus crisis.
He said it was "wishful thinking" for people to expect that the company's major shareholders would stump up the money.
And the Federal Government would be "forced soon to contemplate an injection of money into Virgin" or risk the airline being taken over by a private equity firm.
Wayne Swan: Government needs to prepare for a 'frightened consumer'
Former Labor treasurer Wayne Swan helped the former Rudd government navigate Australia through the global financial crisis.
Mr Swan, who is now Labor's national president, said what the Government did in relation to airlines was crucial not just for the industry, but wider economic confidence.
He noted that the International Monetary Fund had forecast Australia's economy would see a 6.7 per cent decline this year, before rebounding next year, but that if the rebound did not happen as quickly as expected, the nation would be in strife.
He said the Government's economic stimulus needed to go beyond September and saving Virgin should be part of its plans, as "the market will not solve this problem".
"The Government has not yet faced up to a situation beyond really the end of this year, and what our economy will look like where we not only have a cautious consumer, but we may well have a frightened consumer," Mr Swan said.
Treasury has forecast about 1.4 million Australians will be out of jobs because of coronavirus shutdowns, which Mr Swan said would have a lingering impact on consumer confidence.
"There's a huge job the Government is going to have to do in building confidence beyond this year," Mr Swan said.
"But if they can't answer a simple question, like 'are we committed to a two-airlines policy' … that will have a ricochet effect on confidence throughout the economy.
"The decision they take on this matter will have far wider implications and send wider signals about its preparedness to support the economy through a difficult period in the years ahead."
Labor leader Anthony Albanese on Friday also called on the Government to step in and help Virgin.
"Australia needs a two-airline system. It has served the country well," Mr Albanese said.
"The fact is, the Government at the moment is sitting back and watching while 15,000 jobs are at risk. So, I say to the Government that it needs to do more than wash its hands of this issue."
Your questions on coronavirus answered:
ACTU president Michele O'Neil said if Virgin collapses then there is at least $600 million and a likely $800 million in entitlements that the Morrison Government will be required to pay out to 16,000 people.
"The Morrison Government is at a crossroad where they will need to decide if they use taxpayer money to pay out entitlements to people who've had their jobs destroyed or use that money to save jobs and potentially acquire an asset for the nation," she said.
Transport Workers Union national secretary Michael Kaine said pressure was building for the Government to deliver a plan, including taking an equity stake for any bailouts.
"The future of Australian aviation is currently being playing out through crisis phone calls between CEOs and ministers and this is no way to build a sustainable industry that serves the national interest," Mr Kaine said.
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Topics: business-economics-and-finance, air-transport, company-news, covid-19, government-and-politics, federal-government, unions, rural-tourism, tourism, travel-and-tourism, globalisation---economy, health, sydney-2000, australia
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