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Virgin's Branson issues warning over state support for rival Qantas

PUBLISHED : Monday, 17 February, 2014, 4:47am
UPDATED : Monday, 17 February, 2014, 5:39am
 

British tycoon Richard Branson sounded a warning in full-page newspaper advertisements yesterday about possible Australian government help for national carrier Qantas Airways, urging business to "think twice" about investing in the country.

Branson, whose Virgin Australia carrier is in direct competition with Qantas, lashed out at the conservative government in an open letter to the Australian public published in Sunday's newspapers.

Qantas has been lobbying the government to ease limits on foreign investment or provide state intervention to help shore up its bottom line as it battles record fuel costs and fierce competition from subsidised rivals.

The Australian carrier claims a 49 per cent foreign ownership cap under the terms of its privatisation in 1995 leaves it at an unfair disadvantage to Virgin, which is majority-owned by state-backed Singapore Airlines, Air New Zealand and Etihad Airways.

Australian Treasurer Joe Hockey last week described the ownership cap as a "ball and chain around the leg" of Qantas, which he said was now confronting a "3,000-pound gorilla" - widely interpreted as a reference to Virgin.

Branson hit back, saying the description "would be flattering if it was not so laughable" and asking what that made Qantas, "which is four times our size".

"Should the Australian taxpayer be forced by the Australian government to prop up the Qantas group as federal Treasurer Joe Hockey is suggesting, business people worldwide should think twice about investing in Australia for fear of such intervention in their sectors," he said. "Qantas has gone cap in hand to the government. If the government fill their hat, it will severely damage competition in Australia."

In December, Qantas said it was facing some of its toughest-ever challenges as it flagged a half-year loss of up to A$300 million (HK$2.1 billion) and the axing of 1,000 jobs. The airline reports its interim first-half results later this month.

Branson said Qantas already received most government travel spending and "should not be granted further special privileges over all its competitors", noting that until Virgin arrived on the scene in 2000, Qantas "enjoyed a virtual monopoly in most past of the Australian market".

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