Virgin Australia has come out fighting in the latest round of bitter exchanges between the airline and Qantas.
In an open letter to the Government, Virgin Australia chief executive John Borghetti accused the flag carrier of pursuing a strategy of “flushing” Virgin out of the market.
He argued that Qantas has received favourable treatment from the government and labelled suggestions that Virgin is deliberately running at a loss as “absurd”.
Borghetti also reiterated calls for an investigation into Qantas’s 65% “land in the sand” market share policy which he insisted was “crippling competition”.
The open letter emerged as Qantas chief executive Alan Joyce is said to have described Virgin as a “newly minted sovereign-owned airline” which has the ability “to do great harm to not only Qantas but severely disrupt Australia’s critical national infrastructure and aviation policy”.
“If Australia truly wants a level playing field then any measures that the Government plans to take to support Qantas should be offered to Virgin Australia,” Borghetti said in the open letter.
“We believe that this country needs at least two strong airlines in order to ensure the travelling public are not faced with high airfares and restricted choice
“Virgin Australia has succeeded against the odds in a very difficult marketplace with a major competitor three times its size that appears intent on flushing it out of the market.
“If any government support was given to the dominant player, we would expect the same level of support.” Borghetti referred to “comfort letters” sent by the Government to Qantas’s credit rating agencies prior to its own capital raising.
He argued that had Virgin received similar support, it could have achieved “superior outcomes” from its debt bond issue undertaken in the US market and the capital raising. Borghetti also rubbished suggestions that its major shareholders – Singapore Airlines, Air New Zealand and Etihad – were bankrolling Virgin.
“Any suggestion that we, or our major shareholders, are deliberately running the company at a loss is absurd. The concept that our major shareholders have endless money to put into this airline is also completely unfounded,” he said.
“We are currently in the process of a capital raising which is a standard way that publically listed companies raise funds.”
Qantas has raised funds nine times in the past decade, Borghetti continued, generating funds of $1.2 billion. Furthermore, Qantas has access to “tens of trillions of dollars” from institutional investors which represent more than half its share register.
“The proposition that Virgin Australia has access to cheaper capital by virtue of our shareholder base is false,” he said. Virgin again called for a “full and proper” investigation into Qantas’s long-held intentions to maintain 65% of the domestic market.
The strategy “prevents competition and the possibility of new entrants”, Borghetti said. “[We] ask the Australian Government to divert attention to this important issue that is crippling competition and is not sustainable financially for anyone in aviation in this country.”
Borghetti’s defense of his airline and his strategy is unlikely to be the last of the issue with Qantas said to be pushing deputy prime minister Warren Truss to revoke the international flying rights of Virgin Australia. Joyce claimed Virgin’s domestic arm effectively controls its international division. The structure is a “sham”, he said.
“The primary motive will be to damage Qantas in its domestic market so that it will be unable to support its international business,” Joyce was quoted in today’s Australian Financial Review.
