A tie-up that would see Qatar Airways buy a quarter of Virgin would help bolster its competitive position, but it wouldn’t be enough to challenge the dominance of rival Qantas, experts said.
The competition regulator is set to review the merits of a deal unveiled on Tuesday that opens the door for Virgin to offer long-haul overseas flights into Europe through the Middle East.
Virgin chief executive Jane Hrdlicka said the partnership would boost competition for Australian flyers by giving Virgin better access to global tourists, both going out of the country and into it.
“This partnership brings the missing piece to Virgin Australia’s longer-term strategy and is a huge vote of confidence in Australian aviation,” Hrdlicka said.
“It will further strengthen Virgin Australia’s ability to compete over the long term.”
Power struggles
Central Queensland University professor Doug Drury said the deal would help to lift aviation competition amid growing concerns about Qantas’ power after the collapse of Rex and Bonza.
“This partnership will bring Virgin Australia back into the long-haul operations that [were] discontinued after the liquidation of the 777 fleet [during Covid-19],” he said.
“This will provide Australians with more options for travelling abroad … more flexibility for destinations and will initially bring down prices for consumers.”
Boosting competition?
Virgin and Qatar argue the investment will boost competition by increasing the airlines on offer for Australians flying into the country and also outwards to Europe through the Middle East.
Additionally, it is hoped the move will make Virgin’s loyalty scheme more attractive; currently the Velocity scheme is struggling for traction with flyers without a compelling international flight offer.
But veteran aviation consultant Neil Hansford said Qatar buying a stake of Virgin wouldn’t be a “panacea” for airline competition in Australia and would “not greatly” move the needle.
“The benefit to Virgin is the inbound traffic, and the ability for people with frequent flyer points to be able to use them internationally,” he said.
“[But] won’t give them anywhere near the network Qantas has.”
The plan released on Tuesday would see Qatar Airways take a 25 per cent stake in Virgin from its majority owner Bain Capital, requiring both ACCC and federal government approval.
Virgin will launch flights from Brisbane, Melbourne, Perth and Sydney into Doha, claiming this will open up more than 100 new “connecting itineraries” across Europe, the Middle East and Africa.
Reputation and political approval
The long-haul services would begin midway through next year under the proposal, which will still need Foreign Investment Review Board (FIRB) approval in addition to ACCC competition assessments.
In other words, Treasurer Jim Chalmers will ultimately need to sign off on the deal personally.
That brings into focus questions about Qatar’s reputation and a past decision from the Albanese government to block a bid from the international airline for expanded access to local air routes.
Qantas, which has an airline partnership with rival global airline Etihad, lobbied the government aggressively against letting Qatar run more flights between Australia’s large capital cities.
The diplomatic fallout from an improper strip search of an Australian tourist at an airport in Doha has reportedly played a role in souring relations between the government and Qatar Airways.
But Labor will nevertheless face pressure to approve the move, particularly after Transport Minister Catherine King said earlier this year that the government wanted stiffer competition between Qantas and Virgin.
Chalmers declined to comment on whether Labor would approve the deal on Tuesday, saying the ACCC will develop its view on the deal first.
“I will say, more broadly, we do want to see a strong, competitive airline industry that delivers for consumers,” he said.