An aviation insider has suggested airline ticket prices could soar to $1,000 as Qantas exploited its monopoly over domestic air travel.
Virgin Australia confirmed it will be going into voluntary administration, leaving 16,000 direct and indirect jobs in jeopardy until it is restructured or rescued.
The Velocity Frequent Flyer program is also in doubt, leaving customers with nothing to show after many years of loyalty.
Sir Richard Branson, a flamboyant British billionaire, brought some competition to Australia in 2002 when his new budget carrier Virgin Blue filled a gap left by the collapse of Ansett Australia.
The era of intense competition is set to end, leaving Qantas without any competitors on key domestic routes, sparking fear among tourist operators in regional areas.
An aviation insider has suggested airline ticket prices could soar to $1,000 as Qantas exploited its monopoly over domestic air travel. Virgin Australia confirmed it will be going into voluntary administration, leaving 16,000 direct and indirect jobs (flight attendants at Brisabne airport, pictured on April 21, 2020) in jeopardy until it is restructured or rescued
A businessman with inside knowledge of Australia’s aviation industry said the flying kangaroo airline was likely to ruthlessly exploit its monopoly, which could see passengers charged up to $1,000 for a one-way Sydney to Melbourne flight.
That’s a tenfold increase on the $100 tickets Qantas and Virgin were offering before COVID-19 pandemic.
‘If Virgin doesn’t get restructured, it’s not a possibility, it’s a certainty,’ he told Daily Mail Australia on Tuesday.
‘I hate monopolies. Monopolists can do whatever they like. There is nothing good you can say about a monopoly.’
The aviation insider also feared the Australian Competition and Consumer Commission would be powerless to stop Qantas from ripping off the flying public.
‘The ACCC can only do what it’s empowered to do and the ACCC has no power to stop gouging prices,’ he said. ‘There’s no law to stop price gouging.’
Virgin Australia customers are also at risk of losing their Velocity Frequent Flyer points.
Financial comparison website Finder’s editor-in-chief Angus Kidman said while it is a separate company to Virgin Australia, it was very much tied up with the airline.
Sir Richard Branson, a flamboyant British billionaire, brought some competition to Australia in 2002 when his new budget carrier Virgin Blue filled a gap left by the collapse of Ansett Australia
‘For frequent flyer points, the picture is still murky,’ he told Daily Mail Australia.
Who owns Virgin Australia?
Abu Dhabi government – 21%
Singapore government – 20%
Nanshan Capital (China) – 20%
HNA (China) – 20%
Richard Branson – 10.4%
Australian shareholders: 8.6%
Source: Virgin Australia annual report
‘Velocity Frequent Flyer is technically a separate company and isn’t going into administration, so points balances shouldn’t disappear automatically.
‘However, the value of that business is still very much tied to Virgin Australia being an operating airline.’
Mr Kidman suggested that even if a third party bought VFF data, the ‘points balances could well be at risk in that scenario’.
Tourism Accommodation Australia chief executive Michael Johnson said the possible loss of Virgin Australia would be a blow for regional areas as the coronavirus travel restrictions were eased.
‘Initially, as we eventually move out of the COVID-19 crisis, the hotel sector will be heavily reliant on domestic tourism, with international borders expected to be closed for many months,’ he said.
The aviation insider also feared the Australian Competition and Consumer Commission would be powerless to stop Qantas from ripping off the flying public. Pictured are grounded planes at Brisbane airport on April 21, 2020
‘There are very real fears an airline monopoly would take away the competitive edge needed to ensure corporate, conference and leisure guests are well catered for in our key recovery markets.’
CORONAVIRUS CASES IN AUSTRALIA: 6,641
New South Wales: 2,969
Western Australia: 545
South Australia: 435
Australian Capital Territory: 104
Northern Territory: 28
TOTAL CASES: 6,641
John Borghetti, a 36-year Qantas veteran, took over as Virgin Australia chief executive in early 2009 and borrowed big to take on his former employer, who overlooked him as CEO in favour of Irish-born mathematician Alan Joyce.
Under his decade-long leadership, the flying public has paid a lot less for air tickets as Virgin became a full-service carrier.
Virgin Australia, however, has $5billion worth of debt has made a full-year loss every year since 2013.
Prime Minister Scott Morrison has repeatedly ruled out giving the embattled airline a $1.4billion emergency loan as high debt levels threaten to push it into administration.
‘There is no way the government could have been an investor or a lifeline for a company that was saddled with the massive debt that Virgin had,’ the aviation insider said.
Across the Tasman, his Kiwi counterpart Jacinda Ardern has lent Air New Zealand $NZ900million ($A849million).
The Velocity Frequent Flyer program is also in doubt, leaving customers with nothing to show after many years of loyalty
Instead of offering loans, the Australian government is instead giving Virgin and its rival Qantas $165million worth of subsidies to fly domestic routes between the capital cities and major regional centres.
Nonetheless, the aviation insider told Daily Mail Australia Virgin Australia could survive under a new name, which would take away the need to pay Sir Richard royalty costs to use the Virgin name.
‘What I think we’ll see, it’s a much better than even chance, is that we’ll see out of this a new Virgin: it might not be called Virgin by the way,’ he said.
He predicted Paul Scurrah, who took over Virgin Australia a year ago, would remain as chief executive of a leaner operation without its budget carrier offshoot Tigerair Australia.
‘We have three to six months to get this sorted out,’ the insider said.
‘That gives an administrator and a new owner the chance to sort it out.
‘You cannot see the airlines coming back into fully service, certainly less than three months.’
Virgin Australia could be sold within months
Administrators intend to sell off Virgin Australia within months and don’t plan to carve it up.
The airline went into voluntary administration on Tuesday and a quick sale is now anticipated.
‘There is an extraordinary number of parties keen to be involved,’ administrator Vaughan Strawbridge, from Deloitte, told reporters on Tuesday.
‘This is a matter of months, not longer than that.’
As the hunt for a buyer rolls on, staff who still have jobs will continue to receive their wages, and eligible staff will get the government’s JobKeeper payments.
He said moving the airline’s Brisbane headquarters to Sydney is not under consideration but added that issue would be worked through with potential buyers.
Virgin Australia CEO Paul Scurrah said a sale was the best way of ensuring the airline survived, after it failed to secure the liquidity it needed from shareholders, governments and others.
‘This is a tough day for our airline … (but) we’re certainly not collapsing,’ he said.
‘It is our absolute intention to emerge stronger. Australia needs a second airline and we are determined to make sure we are that airline.’
He said the coronavirus crisis had severed the airline’s oxygen supply, but a new buyer would hopefully ensure Australia has a second carrier when things get back to normal.