Virgin thrown a lifeline as Queensland state government moves to buy airline

The Queensland State Government has announced it will make a bid for an ownership stake in Virgin Australia after the airline went into voluntary administration last month.

Premier Annastacia Palaszczuk announced she has appointed the Queensland Investment Corporation to facilitate the ambitious bid, which has been named ‘Project Maroon’.

The embattled airline has struggled to cope since the coronavirus crisis took hold.

Border closures and travel bans in Australian and across the world have left the carrier financially struggling and put the airline’s 16,000 employees at risk of losing their jobs.

Queensland Treasurer Cameron Dick said his number one focus is to retain and create jobs for Queenslanders during the pandemic.

‘Having two Australian carriers is in everyone’s best interests and is the best way to support tourism, jobs and regional investment and to help keep the air fair,’ he said.  

‘We have an opportunity to retain not only head office and crew staff in Queensland, but also to grow jobs in the repairs, maintenance and overhaul sector and support both direct and indirect jobs in our tourism sector.’

While it remains unclear whether the state government is hoping to secure a direct equity stake, a loan, a guarantee or other financial incentive, QIC chief executive Damien Frawley told the Australian Financial Review the restructure of Virgin represents a significant opportunity for Queensland.

‘We are well-equipped to manage the state’s interest in Virgin Australia Holdings should the consortium be successful,’ he said.

‘QIC’s track record as an acquirer, owner and manager of nationally critical infrastructure for both the Queensland government and long-term investors supports our consortium bid.’

Virgin Australia initially hoped to do a deal with the federal government asking them for a $1.4billion bail out package.

But Treasurer Josh Frydenberg was adamant the Australian taxpayer would not be rescuing the airline, which was already facing a $5billion dollar debt before the COVID-19 shutdown.

‘The government was not going to bail out five large foreign shareholders with deep pockets who, together, own 90 percent of this airline,’ he said.  

‘This is not liquidation. This is not Ansett. This is not the end of the airline. Rather, as the company itself has said … this is an opportunity for the company to recapitalise and come out stronger on the other side of the coronavirus crisis. 

‘Our objective is a market-led solution. Our objective is two commercially viable, major domestic airlines operating in Australia.’

More to come.