Ethics of airline bailouts in spotlight with Virgin-Qantas feud

TheStar Wed, Apr 01, 2020 03:17pm - 3 years View Original


Qantas planes are seen at Kingsford Smith International Airport, following the coronavirus outbreak, in Sydney, Australia, March 18, 2020. - Reuters

SYDNEY: An ugly feud is escalating between Qantas Airways Ltd. and its closest Australian competitor over the ethics of state aid, just as airlines facing collapse around the world race to secure bailouts.

With demand all but gone, Qantas is hunkering down to weather the coronavirus crisis after a run of record profits. It has furloughed most staff and used planes as collateral to swell its cash reserves to A$3 billion ($1.8 billion). Meanwhile Virgin Australia Holdings Ltd., unprofitable for seven years, has asked for a A$1.4 billion government loan that would convert into equity if unpaid.

Qantas argues that Virgin’s record shouldn’t be rewarded with a bailout, while Virgin has accused Qantas of spreading false rumors about Virgin’s cash position. The dispute intensified Wednesday after Australia’s corporate regulator said it’s investigating allegations against Qantas, which may have influenced the share prices of both airlines. Qantas said the claims "are categorically wrong.” The fight for credit is likely to play out between strong and weak airlines globally as the sector teeters on the brink. Without government help, more than half the world’s carriers face bankruptcy within two to three months, the International Air Transport Association said. Airlines worldwide face a $252 billion passenger revenue shortfall this year, according to IATA.

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