COVID-19 impacts on Australian airlines

{Note from mods - this thread split from here: When will Australia reopen post COVID-19}

Ideologically, maybe no but I think too much is at stake. Virgin has been losing money consistently for the 10 last years but there is also national interest considerations. A one airline monopoly is in no ones interest and would really harm any chance of an economic recovery for a long time. A leaner, smarter and smaller Virgin would be my hope.

 

Virgin Airlines have been bleeding money for years, but having a monopoly airline in the market is a really bad thing too.

I think an overseas new entrant would come and fill Virgin's spot as a competitor to Qantas if Virgin Australia falls over.

As to debt etc.

I think older folk with assets are fairly well insulated in this pandemic.
I think the biggest victims are the business owners and younger people because they tend to have less secure employment, often working in retail and hospitality. These are the people are victims.

I think PAYE employees with comfortable jobs in safe industries are pretty well insulated economically in the pandemic (relatively speaking).

My super went down and the Airbnb I own won't be making so much money in the next few months. But on the whole I feel I'm really not too affected.

I'm saving heaps of time (no commute) and money (not eating out, no need to pay for transportation costs). Travel is postponed for a year, and it looks like I might end up getting purchased leave as salary instead. (Damn, more tax).

 

But would we save Virgin over Qantas an Australian company?

 

Definitely could happen however all airlines worldwide are presently in survival mode and weakened. It would have to be a state sponsored competitor.

 

Qantas has the cash to outlive Virgin, the government would not allow Qantas to collapse, too much political collateral at stake in my opinion.

 

That is why I am conflicted.

Should the Australian taxpayers bail out a company (in this case, 90% owned by overseas companies) which, on the face of it, looks like being poorly managed (if it can’t make a profit on $6B revenue) just because it is in the national interest.

Years ago, from memory, the Australian taxpayer had to bail out BHP and that caused an uproar.

 

I believe the only option (assuming Virgin can't raise capital any other way) for the government is to bail them out, but it must be at commercially acceptable terms. i.e acquire a sizeable amount of equity that they can sell for a profit once the airline industry is back on its feet.

So less a bailout and more of a government based capital raising.

A monopoly airline industry will be terrible for the country.

 

Agreed. Like the US Government did during the GFC. Equity stakes in banks and auto industry.

No blank cheques.

 

The 10% listed on the ASX has a market cap of $726.29m. At that rate, the airline is currently valued at $7.26B.

The airline already has $5B of debt and wants the Government to loan them another $1.4B. Total debt of $6.4B (LVR of 88%).

Given their poor profit record, it is a high risk investment IMHO

Totally agree.

Tough decision for some to make. You lose if you do and you lose if you don’t.

 

National security risk not to have an airline.

 

Not to have 2 airlines.

 

Agreed - a monopoly is not good for anyone. Apparently the Qantas price for domestic flights, on some routes, increased by nearly 500% the moment Virgin pulled out of them

 

Totally agree but scomo doesn’t want it. He must have too many friends at qantas.

It can be said that qantas isn’t really an Australian airline either with a near 49% foreign ownership.

 

It's a difficult proposition, buying equity in Virgin rather than a cash hand out to a foreign company is the only palatable option.

I think the government is hoping a foreign buyer solves their dilemma. It is probably only state owned Chinese buyer's with sufficient funds and appetite to make such an investment.

Either way the government loses, politically or financially.

 

I don’t think it’s that difficult to be honest. Australian government has stood down the airline/restricted flying due to the virus and now they can’t produce revenue. Qantas has stated in 11 months time they will be in the same position.
Virgin asked for a loan, not a bail out or free money like Rex was handed without needing to pay it back, who is also part foreign owned.

It’s such an easy solution, give them the loan and stop choosing favourites as scomo is doing, and take part ownership if it doesn’t come through, or take some now. I mean you can’t lock down a country then expect businesses to survive months on end on their own.

If it does go down, the hand outs in job seeker unemployment payments will be almost the amount of the loan they are asking, let alone the lost amount of taxes generated through staff into the economy. I know what I’d do.

 

Ok, it's not the airline's fault they can't fly so they need support, and that makes sense. I also don't want Australia to be a one airline country too, a monopoly is bad to have from the perspective of the consumer but Virgin has been hemorrhaging money though for years and I can't see a reason for that to change.

Re: Unemployment payments, Virgin staff will be able to be redeployed into other companies/industries so they shouldn't need support for too long.

Side note. I worked directly in the Travel industry between 2003-2012. I worked in Corporate Travel 2003 - 2009 and Travel agency retail/Wholesale travel business part of the industry 2009 - 2012. I remember SARS was an issue, but the GFC (Oct 2008) had a big impact to travel - all the Corporates cut unnecessary spending, and Travel was considered unnecessary. Thus, I was made redundant from the role I was in at the time.

I worked with an ex-Ansett employee, and for years (even till 2007?) she would receive money, I'd say it was her entitlements finally being paid out. But by then, all this money was just like a bonus for her. She didn't need it to live on.

I think a new airline might take the #2 carrier spot in Aus if Virgin go down, it would be a while till it happens though and in the meantime, Qantas will have free reign to charge whatever they want.

The virus has shown that many people can effectively work from home though, so some travel that happened pre Covid won't be needed in future.

 

lt's bloody disgusting that really even Quantas isn't even Australian. Australia doesn't even do the maintenance anymore
And how can Virgin even be considered anything to do with Australia there's not an aussie name on it anywhere then , or an aussie dollar in it.
lf you ask me they should buy Virgin then out right rather than throw money at something technically really , nothing to do with Australia , even the name isn't ours.

 

Unfortunately the belief of another airline just coming straight in and taking over is false, took virgin 2 aircrafts per month to get staff trained and paperwork sorted to comply with civil aviation safety authority, this can’t be sped up much either. After a year there’s only 24 aircraft, current fleet is 130. Qantas will destroy the market and start charging an additional 40% on airfares. There’s not many that will want to come into an airline industry at this time and just bleed money whilst qantas eat up the market.

Without doubt many will move on into other careers but not for any of the pilots. It’s a specialty position, they won’t work for years in aviation, if ever again. Qantas won’t be hiring either. For the crew they will struggle to find work as well, the unemployment rate will be near 10% by June, and predictions of 15-20% by December if the lock down continues.
Do you know how hard it is to find a career let alone any job at those unemployment rates? As they they ‘forget about it.’

 

Join the airforce or teach flying....

Guess being a pilot could also become automated... at some point in time. Truck drivers and bus and train drivers won't be needed sometime. Its automation.

That's just how life works.
Many humans used to be farmers, many used to be checkout operators. I used to put price labels on goods at Big W once upon a time.... (and I was really quick at it too!)

When people find industries change, people adapt and pivot.
And if you don't... well, that's largely your own fault.
It's not so hard to train to do something else. I know someone who went from being optometrist to an IT guy, and another guy who went from being a dentist to a bus driver.
Huge changes, but it's doable.

I could become a welder, but I would probably be taking quite a pay cut for it.
But the chance to retrain to do something totally different.... why not?