Virgin Australia’s boss has blamed Qantas for the air war that has left both airlines bleeding money and says its rival does not deserve government help.
Virgin slumped to a first half net loss of $83.7 million, to follow Qantas’s $252 million underlying loss and axing of 5,000 jobs on Thursday.
However as Qantas’s Alan Joyce met with unions in Sydney, Virgin boss John Borghetti said the government or opposition should think very carefully before it decides to pick winners in the industry.
Travellers had been the big winners now that Australia’s aviation industry was no longer a monopoly and government intervention would discourage new entrants, Mr Borghetti said.
“The big question is: Do we want competition to continue for 23 million Australians, let alone millions of international visitors that come to this country every year?” he said.
“If Australia is to prosper in the age of globalisation, then the age of entitlement needs to go.
“We have had to earn every gain we have made, against a dominant player who has not hesitated to use its scale to try to continue its privileged position in the market.”
Qantas dwarfs Virgin, employing more than 32,000 employees to Virgin’s 9,500.
Both airlines blame each other for the capacity war causing losses, but Mr Borghetti said Qantas had flooded the market with 7.1 million new seats in three years compared to Virgin’s 2.8 million.
Mr Borghetti is urging the federal government not to grant Qantas’s request to guarantee its debt but said the Qantas Sale Act should be changed to allow foreign investors to take greater stakes in the national carrier.
He rejected the suggestion Virgin was government-financed through its state-owned largest shareholders Singapore Airlines, Etihad Airways and Air New Zealand, pointing out that did not include debt guarantees.
Virgin’s underlying pre-tax loss was $49.7 million, with the $27 million cost of the carbon tax contributing to the higher net loss.
Mr Borghetti said he was confident Virgin was on the right path back to profitability.
While Qantas claims a 65 per cent share of the domestic market, he said Virgin had increased its proportion of domestic revenue from the lucrative corporate and government market to the mid-20s per cent range.
IG market strategist Evan Lucas said Virgin had outperformed Qantas growing revenue, but the fact that it had not provided financial guidance for the rest of the year and a 10.6 per cent cost rise would turn investors against it.
“If you ask what type of business an airline is, on face value it looks horrible but they have to be around as there’s a necessity and need for them,” he told AAP.
“Aviation is going to be an interesting story over the next 18 months … I think by then Qantas will have stripped their international division to 1-2 flights in Brisbane and Perth, just one in Adelaide.”
Virgin shares fell by a quarter of one cent to 34.75 cents by 1545 AEDT while Qantas recovered from Thursday’s 9.0 per cent rout to be up one cent to $1.165.
