#HNA

QLD gov’t to subsidize the rest of Australia on Virgin bailout?

AA

You have to hand it to the Queensland Government’s absolute lack of awareness. It has intimated that it might fork over $200m in loans to rescue the airline. To call any airline a “family jewel” means one probably thinks Great Wall is the pinnacle of luxury auto brands.

Perhaps what Premier Palazczuk and Treasurer Trad miss is that by using Queensland taxpayer funds they would effectively grant residents in other states the full benefit of Virgin’s recovery for free. Furthermore, if Virgin didn’t manage to pay back the monies, Queensland taxpayers would undoubtedly be caught in a zombie lending scenario. So the other states would still benefit. Federal Treasurer Josh Frydenberg should be more than happy to see the sunshine state take his place.

We are surprised that so much umbrage is being taken at the idea of Chinese money coming in to subsidize the troubled airline. There is a sense of irony to see people cry nationalism when the airline has largely been owned by foreigners, 40% from China for a considerable time.

It is not as though the Chinese would treat Virgin Airlines like cans of baby milk powder and take all their planes home. Any rational investor would want to own a profitable airline based on juicy slot allocations rather than pursue relentless growth by building parallel tracks to already unprofitable destinations.

Sure, having an airline that boosts competition is a wonderful thing. We agreed with distressed debt specialist Jonathan Rochford’s summary which suggested insolvency as the best path forward. That way, hard decisions would be forced on Virgin and the restructuring would leave no stone unturned. Aircraft leasing companies have gone through this dance before and would be only too willing to act sensibly to help in the rebirth, especially given the appalling state of rail or road alternatives.

We understand people want to play hardball with China in a post-COVID19 world for its willful neglect shown during the pandemic. However, we must not let irrational fears turn away investment that benefits us, just because it is from China. Aussie investors haven’t supported Virgin much since the IPO in 2003. So why not let the Chinese do their dough? If we embraced their capitalist streak, were this investment to lower ticket prices, would we really complain? Or would we protest the idea that Qantas’ future might be at risk?

As comedian Dave Allen once said bout airlines, “they would make more money by leaving the planes at the gate and burning piles of cash on the runway!