Labor has stepped up its calls for government to come to the aid of Virgin Australia, saying the beleaguered airline's survival is vital for Australia's economy and for industry competition.
The federal government has announced close to $1 billion in industry aid since the coronavirus outbreak, which has obliterated travel demand and put airlines around the world under severe financial pressure.
But it has balked at Virgin's request for a $1.4 billion loan, which the debt-laden carrier says it needs to ensure it can survive the crisis.
Virgin has asked for government help to ensure it survives the coronavirus shutdown. Credit:Edwina Pickles
Labor's shadow transport minister Catherine King said in parliament on Wednesday the industry status quo – having Qantas, Virgin and their budget off-shoots Jetstar and Tigerair – had served the economy and travelling public well and should be maintained to protect jobs, ensure regular air services and promote competition.
"The government must extend a lifeline to Virgin if we are going to continue to see the current aviation structure survive this crisis," she said.
"If it does not, it is taking an active decision to see one of our major airlines fail in this country, and that will have significant consequences for hundreds of workers in the aviation sector and across our economy to come."
Ms King said government should consider granting loans or guaranteeing loans, or taking an equity stake in airlines, which would ensure it recouped its investment when the industry bounces back.
Transport minister Michael McCormack said in a statement that the government was committed to ensuring the industry was sustained through the pandemic, and that he was talking to airlines daily about "what else may be required as the pandemic continues".
The deputy prime minister announced a $715 million aviation rescue package last month, consisting of waived fees and levies. He followed that with a further $198 million package for regional airlines, and another $100 million in cash support for smaller regional carriers if required.
Virgin has proposed a "bridging" loan of $1.4 billion to be paid back over two or three years, which government could convert to an ownership stake in the airline if not repaid.
With Virgin's market value sitting at $700 million, the government would become the airline's largest shareholder if it converted its debt to equity, significantly diluting its existing major shareholders.
Singapore Airlines, Etihad Airways, Chinese groups HNA and Nanashan and co-founder Richard Branson together own 90 per cent of the company.
However, Mr McCormack has previously said government had no intention of nationalising airlines.
Reports last week quoted unnamed government sources saying it did not intend to bail out Virgin and would instead facilitate another airline's entry into the market.
Government sources told The Sydney Morning Herald and The Age that federal cabinet was divided on whether to come to Virgin's aid. The airline's CEO Paul Scurrah says discussions are ongoing.
Market analysts have suggested that Virgin could last for three to six months before it burns through its available cash balance as most of its planes sit idle. Qantas, which has pushed back against a government bail-out for Virgin, is in a stronger financial position and can last closer to a year.
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