Virgin Australia (VA, Brisbane International) has responded to claims that its proposed integrated alliance with Qatar Airways (QR, Doha Hamad International) will result in an open-ended wet lease arrangement relying on foreign labour and see cutbacks in existing partnership benefits. In contrast, the carrier says the impending alliance presents a rare and valuable opportunity to improve airline competition in Australia.

Qatar Airways Group wants to buy a 25% stake in Virgin Australia and significantly deepen an existing non-equity strategic partnership into a so-called integrated alliance.

"Leveraging Qatar’s capacity and deepening our commercial relationship gives us a shot at something special,” Virgin Australia CEO Jayne Hrdlicka said last week. "This partnership gives us scale we previously didn’t have."

This week, the airline responded to several submissions made to the Australian Competition and Consumer Commission (ACCC), one of several government agencies that must approve the planned alliance.

The alliance "offers the chance to introduce further domestic capacity and greater choice for Australian travellers," Virgin Australia's filing reads. It "will directly benefit consumers with downward pressure on airfares in the context of a cost-of-living crisis and fares having surged by over 40% compared to pre-pandemic levels on Europe, Middle East, and Africa routes."

Key to the alliance is a proposal by Virgin Australia to wet-lease Qatar aircraft to operate daily roundtrips to Doha from Sydney Kingsford Smith, Melbourne Tullamarine, Perth International, and Brisbane. Qatar already flies daily into these cities and, in the case of Melbourne, twice-daily. Virgin Australia already codeshares on these flights and on multiple Qatar-operated flights beyond Doha. An application by Qatar Airways to increase flights to Australia last year was rejected by the Australian government for reasons never made clear.

"If [Virgin] did decide to acquire widebody aircraft to commence these services, it would need access to those aircraft - the delivery horizon for which is currently in the region of five to seven years," the filing reads. "There is no scenario where Virgin Australia can do this by itself today or build a long-haul business independent of a scale international partner carrier."

Refuting Qantas claims

Virgin Australia's application had faced some pushback, including from Qantas Group, because its proposed wet leases had no clear end date beyond the alliance's authorisation period and would rely on a Qatari workforce paid less than their Australian counterparts. The group says that without some limits, wet leases may be used to side-step domestic laws and regulation.

"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," its submission to the ACCC reads. "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."

Virgin Australia disputes this. Its alliance application period covers five years. It notes that Qantas (QF, Sydney Kingsford Smith), a larger airline, is currently wet-leasing Finnair A330s for two-and-a-half years before moving onto dry leases.

"Through the wet lease arrangement, Virgin Australia is able to quickly and efficiently commence services from Brisbane, Sydney, Melbourne, and Perth from mid-2025," Virgin's filing says. "Unlike the Qantas-Finnair arrangement, which is used to operate Qantas' pre-existing services with foreign-based crew, Virgin Australia is using wet lease services to deliver entirely new services that would not otherwise be flown. There are no Australian jobs in existence which are being replaced or removed as a result of the decision to use a wet lease."

The Australian Federation of Airline Pilots broadly supports the Virgin-Qatar alliance but wants the airlines to transition to a dry lease arrangement by the end of the five-year period or cease the wet lease flying after three years. They say wet leasing is an "appropriate short-term tool" but should not be indefinite.

Virgin Australia says that under the proposed alliance there would be a preferential direct entry pathway for Virgin flight and cabin crew into Qatar Airways, including via agreed pilot and cabin crew secondments. It also says it plans to return to long-haul flying on a "gradual" basis, utilising its own aircraft and crews.

However, it does not commit to moving to dry leases within five years. At the end of that time, if the ACCC "determined that either the wet lease or the broader proposed conduct were no longer in the public interest at this time, there are opportunities for their reconsideration," its filing reads.

Etihad out, other partnerships remain

Separately, Virgin Australia's filing points out that proposed geographical exclusivity arrangements relate to codeshares only and not existing opportunities to earn and redeem points across Virgin's partner network - an issue agitating some travellers.

"Qatar Airways will become Virgin Australia’s exclusive interline, codeshare, and loyalty partner headquartered in the Middle East or Türkiye," the filing notes. "Virgin Australia’s arrangements with South African Airways and Virgin Atlantic are unchanged. Etihad Airways will cease to be a Velocity (frequent flyer) partner. With or without the proposed conduct, Virgin Australia does not codeshare on Etihad Airways’ services."

Etihad confirmed earlier this week that it would end its current arrangement with Virgin Australia on June 1, 2025. "The decision reflects a divergence in the strategic direction of the respective airlines," Etihad's statement said. Last decade, Etihad held a 21% stake in Virgin Australia - one of many strategic stakes Etihad held in airlines that later went bust.

"While Virgin Australia and Etihad Airways once had a significant partnership, this has been much more limited since 2020," Virgin Australia's filing noted.

The only changes to existing arrangements with Singapore Airlines (SQ, Singapore Changi) will be to remove Europe, Africa, and Middle East destinations as codeshare flights. Loyalty arrangements will remain unchanged.

Virgin Australia says the proposed integrated alliance will allow it to grow and expand services. The airline says the alliance will incentivise it to prioritise passenger uptake of its wet lease operated services to Doha that connect to EMEA destinations, supporting their viability and the potential for future growth of Virgin's network. In turn, Qatar Airways will be able to maintain and grow its commitments in Australia by supporting Virgin Australia’s growth.

“It’s a phenomenal partnership. We’ve learned from the past and will not repeat the same mistakes," Hrdlicka said last week. "It enables us to work differently."