Virgin Australia could receive a $200 million lifeline from the Queensland government as it looks to stave off going into administration.
The airline has asked for a $1.4 billion loan from the federal government but that’s yet to materialise.
The company, like most airlines around the world, has been hard hit by the coronavirus as people don’t want to or can’t travel like they used to just a few months ago.
Virgin and Qantas have so far received assistance in the form of a $165 million injection from the government to support them running domestic services for the next eight weeks.
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Qantas had slashed its number of services to 105 a week before that announcement, and Virgin had practically stopped operating, only able to afford running one return flight a day, six days a week.
Given the pandemic, and some states closing their borders, there hasn’t been huge demand for domestic flights.
The recent funding is hoped to help keep planes in the air to move important supplies and essential workers to where they need to be.
But with its shares in a trading halt and thousands of staff stood down, Virgin wants more money.
So far the Qld government has come to the table offering $200 million, but other states will also have to tip in.
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Queensland’s development minister Cameron Dick said the $200m bailout deal offered to Virgin Australia by the state aims to “ensure the two airline policy can continue”.
“If we’re going to get through this pandemic with two national airlines, if we’re going to have two national airlines at the other side of this pandemic, then all governments need to come together to ensure that is the case,” he said during a press conference this morning.
“Queensland can’t do this on its own. We need a national response. This is a national airline weathering a national crisis and it needs a national response which is why we’re asking the Australian government to take the lead on this.”
Mr Dick said it was important for all states and territories to come together to ensure Virgin comes out on the other side of the pandemic.
He said Queensland didn’t want to see Virgin workers lose their jobs.
“We want to keep the air fair. We know on routes where there is only a single carrier, the cost of flights can be 20 per cent to 25 per cent more than where there is competition,” he said.
“To have competition means that prices are lower and that’s in everyone’s interests.”
Mr Dick called on Scott Morrison to “do the right thing by Australia” and help bailout the struggling airlin
The money is dependent on Virgin keeping its headquarters in Brisbane, where it was already paid $10 million to base itself in 2000.
5500 people are employed at the airline’s headquarters in the Qld capital.
The money could also be used to invest in a new competitor if Virgin doesn’t make it through the pandemic and Qantas gains a monopoly over domestic flights, provided that new competitor also bases itself in Qld.
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Whether or not other state’s jump on board to offer assistance for Virgin remains to be seen, but without the inducement of having the airline based in their state, it’s unlikely many of them will be as quick or generous.
Prime Minister Scott Morrison earlier this week suggested industry super funds such as the Transport Workers Union that represents aviation workers step-up to help the struggling airline.
Industry Super Australia chairman Greg Combet quickly poured cold water on the idea of super funds investing in a struggling airline at this time, saying any investment would be “extremely high risk” and it was “important to understand that superannuation fund trustees have a duty to invest wisely and consider the appropriate returns for the risks involved”.