Qantas Group is not objecting to the planned investment in Virgin Australia (VA, Brisbane International) by Qatar Airways (QR, Doha Hamad International) but says some parts of the proposed partnership deserve further scrutiny.
As previously reported in ch-aviation, the Gulf carrier wants to acquire a 25% stake in Australia's second biggest passenger airline. As part of the deal, Virgin Australia will resume operating long-haul flights, albeit using wet leased Qatar B777s. The matter is currently before the Australian Competition and Consumer Authority (ACCC) and Australia's Foreign Investment Review Board.
In an October 31 submission to the ACCC, Qantas Group executive Cam Wallace said the company acknowledges the benefit to consumers and the local aviation industry that Virgin Australia re-establishing its long-haul capacity would deliver.
This marks a sharp turnaround for the group, which actively opposed a previous application by Qatar Airways to increase flights to and from Australia. However, Wallace, who serves as CEO of Qantas International and Freight, said there were caveats to Qantas's support.
"Given the proposed conduct is going to occur through a wet lease, its potential to impact competition in the sector over the long term should be assessed," he wrote. Wallace acknowledges wet leases are common in the industry and also used by Qantas (QF, Sydney Kingsford Smith). "However, without some limits, they can be used to side-step domestic laws and regulation," he argued.
"The proposed wet lease enables Virgin Australia to schedule services crewed entirely with Qatari pilots and crew, whose pay and conditions are substantially less than Australian-based crew," Wallace wrote. "On face value, that means Virgin Australia will have no incentive to develop its own international services using Australian crew on these routes if it can effectively bypass Australia’s laws and regulations. Without a time limit, it will be able to permanently use Qatari labour at the expense of Australian jobs."
"Left unchecked, the proposed conduct will signal to the wider aviation industry that bilateral air service agreements, which have been the bedrock of the sector since the end of World War II, can be readily circumvented through wet leasing. Other jurisdictions have already recognised this loophole and recommend conditions be put on wet leases to ensure they’re not misused. This includes setting time limits, ensuring they represent only a small proportion of the lessee’s fleet and are not being used to avoid local policy or regulations."
Adelaide Airport Limited, Brisbane Airport Corporation, Sydney Airport Corporation Limited, Canberra Airport, the Australian Airport Association, and the Australian Travel Industry Association (ATIA) have all lodged ACCC submissions in support of the Qatar/Virgin Australia venture, although in the case of ATIA, subject to conditions about protection against collusion on pricing.
Individuals have also submitted applications, in some cases with their names redacted. Some of these submissions are broadly in favour, others are against. Those against cite several factors, including the indefinite nature of the proposed wet leases, the use of foreign labour on what will nominally be flights run by an Australian airline, and changes to current Virgin Australia interline and codeshare agreements.
Separately, the investment fund Perpetual Limited and its related entities have ceased to be substantial shareholders in Qantas, according to a November 8 Australian Stock Exchange filing. The disclosure continues a divestment in the airline by Perpetual, which has spent much of 2024 weathering a governance and wealth writedown storm. In August, Perpetual and its related bodies corporate held 6.48% of Qantas stock. That reduced to 5.426% in September and now falls under 5%.
