May 2nd 2020

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Articles from this issue:

COVER STORY Gearing up to ditch free-trade policy

EDITORIAL Post-covid19, create a national development bank

CANBERRA OBSERVED Keelty water report misses the point on water shortage

ENERGY Pandemic has exposed our overreliance on imports

CARDINAL PELL Locating the golden thread

CARDINAL PELL High Court practically shouts 'not guilty'

FAMILY Dismantling myths around family tax benefits

REFLECTION Covid19 and the Church past, present and future

OBITUARY R.I.P. Bruce Dawe: poet of the people

FOREIGN AFFAIRS Doctors of WHO let the covid19 dogs out

INDUSTRY POLICY The rise and fall of Australian manufacturing and covid19

ASIAN AFFAIRS Politics done by stealth in the UN: China and the WHO

HUMOUR Get them hug-dealers off the streets

MUSIC Farewell to an Aussie jazz legend: Don Burrows

LOCKDOWN TV CLASSIC Unique, unsurpassed: The Avengers





NATIONAL AFFAIRS Crucial to get Virgin Australia flying again

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Crucial to get Virgin Australia flying again

by Peter Westmore

News Weekly, May 2, 2020

When Virgin Australia’s board put the company into administration in April, it had the unenviable distinction of being the largest corporate victim of the covid19 pandemic in Australia.

The immediate impact will be felt by Virgin’s 10,000 employees, including subsidiary Tigerair, and many could lose their jobs. But the employment impact will extend far wider, to Virgin’s suppliers, to airport retailers, to businesses in regional Australia, and to the tourist centres that Virgin services. It will not be surprising if an additional 50,000 jobs are impacted.

Virgin’s difficulties also threaten the bipartisan “Two Airlines Policy” that has been the foundation of Australia’s commercial aviation industry for the past 70 years. Since the 1950s, governments of all persuasions have worked to ensure that there are two viable airlines in Australia, both to ensure competition in the air and to provide a national air network both to large cities and regional areas. That is now in jeopardy.



It should be said, however, that Virgin’s troubles mirror the crisis in the global aviation industry, which has been smashed by the pandemic.

The world has two large aircraft manufacturers, and both are in desperate trouble.

European manufacturer Airbus had a first-quarter loss of €481 million ($A800 million). Chief executive Guillaume Faury said recently: “We are in the midst of the gravest crisis the aerospace industry has ever known.” He told Airbus’ 135,000 staff to brace for potentially deep job cuts and warned that Airbus’ survival was at stake without immediate action. (BBC News, April 27, 2020)

American aircraft manufacturer Boeing faces even worse problems. Following the financial disaster around the crashes of the Boeing B737 Max, as a result of which Boeing’s flagship aircraft has been grounded for the past year, the company booked a loss of $US4 billion
($A6.1 billion) in the March quarter, and its manufacturing operations have been virtually shut down. Boeing’s share price has fallen by more than half over the past few months.

U.S. airlines have suffered similarly, as the shutdown has destroyed their businesses. United Airlines’ shares have fallen by 70 per cent since the start of the year, as have shares in American Airlines.

The problems facing Virgin Australia do reflect the poor financial position the airline was in even before the covid19 pandemic.

Virgin has not made a profit for about seven years, and would not have survived without the indulgence of its major shareholders, which include Singapore Airlines, Etihad, and the Chinese company, HNA Group, which holds about 20 per cent of Virgin Australia.

There is a real danger that Virgin Australia could be rescued from administration by a foreign investor, including HNA Group. Given the interference by the Beijing regime with Chinese companies, this would have adverse consequences for Aust­ralia’s national security, and should not be permitted.

The immediate task for the the administrators of Virgin Australia, accounting firm Deloitte, is to meet the company’s $7 billion in debts, which it is likely to try to achieve by selling the company and distributing the proceeds to the company’s creditors.

At the time of writing, as many as 20 possible buyers had emerged for Virgin Australia. By the middle of May 2020, prospective buyers will be asked to make indicative offers. Binding offers will then be required by the end of June. At least three states have already indicated that they may contribute to the rescue.

Of equal importance is the direction of the company after administration.

Chris Corrigan, former chairman of Virgin Blue, which became Virgin Australia in 2011, has argued that the company lost focus, with a major expansion in the number of routes flown, and types of aircraft in its fleet, over recent years. He urged the new owners to “go back to basics”, running a budget airline on the most profitable routes.

On the other hand, Peter Harbison of the Centre for Aviation has argued that Virgin must operate as a full-service competitor to Qantas in the domestic market, at least in the short term.

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April 4, 2018, 6:45 pm