Interview on ABC Radio Adelaide Breakfast with David Bevan and Ali Clarke

  • Transcript, E&OE
Topics: Virgin Australia’s voluntary administration.
21 April 2020

David Bevan: Good morning to Federal Tourism and Trade Minister, Simon Birmingham.

Simon Birmingham: Good morning, David, Ali, and listeners.

David Bevan: Minister, will Australia have one airline, one carrier under your watch?

Simon Birmingham: I hope not and that's certainly not the government's objectives. Our objective, as we see Virgin take this step into voluntary administration, is that we want to see it come out of that process having restructured and recapitalised. As you heard in the news headlines their statement highlights those objectives, and indeed voluntary administration was not necessarily the collapse of a business but it is indeed a very stressful time for staff, and suppliers, and in the case of an airline for our tourism industry.

But we will work and engage with the administrators to try to make sure that we keep those employees in jobs, that we keep the second airline in the sky in Australia, and that we have a competitive price for aviation in the future as part of our recovery following COVID-19.

David Bevan: Well, can you guarantee that we'll have two carriers?

Simon Birmingham: I can't provide guarantees, David. It’s not a case where government is waving around a blank cheque to assure that we have two airlines in the sky. But it is a case that we will engage thoroughly with the administrators, that we're very clear in the objectives of what we want to see, and that we know the voluntary administration process is an opportunity for a business like Virgin to work its way out of this.

We've seen this with many Australian businesses before, whether it's Network 10 in the media landscape, or here locally in South Australia looking at Arian previously, that voluntary administration could be a difficult period and uncertain period but also a chance to come out the other side as a more viable company for the future.

Ali Clarke: Simon Birmingham though, some are saying that you should have engaged in this earlier. I mean Labor's Catherine King, for example, wants you to take an equity stake in Virgin. Just have a listen to what she had to say:

[Excerpt]

Catherine King: Well I think the government now has played favourites with an airline, that it's decided that it's going to see one fail and one not fail. That's the decision that Scott Morrison has taken, and I think 16,000 workers and their families are probably never going to forgive him for it.

[End of excerpt]

David Bevan: There you are. She says they'll never forgive you.

Simon Birmingham: Well, I completely reject the idea that we've played favourites — indeed, far from it. What we've done to date is ensure that wherever we have provided financial support to the airlines, as we've done to the tune of about $1.2 billion through the COVID-19 process here — we've provided that in a very evenhanded way to Virgin [audio skip] to Qantas. Targeted ways to regional services as well to make sure we keep them open and flying.

So we certainly haven't played favourites and I think it is completely irresponsible when it comes to tax payer’s dollars that the Labor Party seems to think that government buying a stake in an airline should be the first resort, whereas government engagement should be the last resort.

I don't rule it out as we work through the voluntary administration process that there may be other things the government needs to consider, but we certainly shouldn't have been charging in to a largely foreign-owned airline offering to bail out those foreign equity partners, companies like Etihad, and Singapore Airlines, the Virgin Group, Chinese owners, Virgin Australia.

Now, the voluntary administration process allows an opportunity for some of that potentially to be wiped away, and possibly for new owners to step in with new structures that may enable, hopefully, the company to operate far more strongly into the future. This is an airline that has made a loss in eight out of the last 10 years. Its share price a year ago — well before COVID-19 — was half what the share price was four years prior to that. And that you could pick up any of the financial newspapers, and they don't just cite the virus as part of Virgin's challenges, they cited debt levels and other operating challenges as well.

David Bevan: Is this is the first strong point of difference between the Government and the Opposition since the pandemic started?

Simon Birmingham: Well, it's probably for commentators to judge. But look, I certainly say I think Labor's approach is irresponsible and reckless when it comes to tax payer dollars. Why on earth you would have wanted, as Labor had been doing for weeks now it seems, to volunteer to bail out the foreign-owned equity holders at Virgin Australia.

Our priority is on saving the jobs of the employees, not the equity of the foreign owners. And our priority is on ensuring that we have two airlines, a competitive sector into the future, and we will make sure that we use our competition powers at a federal level to ensure that. And there is a very close watch on Qantas should new owners in a restructured airline be competing with them after the COVID-19 restrictions are lifted.

David Bevan: Virgin Australia is, I think, about 40 per cent owned by two Chinese companies — Nanshan Capital and HNA. Now, will the Federal Government allow Chinese companies to effectively take over Virgin Airlines?

Simon Birmingham: Well, that would be a possibility. The Foreign Investment Review Board, and ultimately the Treasurer, would have to approve any new foreign ownership structure. We took the step a few weeks back to make sure that any foreign investment in Australia during this COVID-19 period is subject to all of those sort of processes — the Foreign Investment Review Board processes, the Treasurer’s approval — so that we couldn't see people coming in and basically sweeping up assets that were under some threat or viability problems because of COVID-19.

But Virgin Australia is already essentially a foreign owned airline. They're a tiny number of Australian shareholders and if it takes those foreign owners-

David Bevan: But some Australians might not like- Minister, some Australians might not like the idea of a Chinese- of Chinese companies benefiting from a virus which originated in China. And whether or not that's fair, rational, or whatever they might not like the idea.

Simon Birmingham: Whether or not they’re benefiting in terms of if they choose to buy a distressed asset in terms of Virgin Australia that’s in voluntary administration, and to recapitalise that airline, and to save the jobs of the Australians who work there, and to keep competition in the Australian aviation sector- I mean, we want to encourage people to see that this is an airline that. if the debt levels it's got at present are addressed, and that if it is restructured and recapitalised, could absolutely have a strong future, is viable.

We want to encourage as many potential buyers into that marketplace as possible so that ultimately, ideally, taxpayers don't have to prop up any airline at all because you've actually got the equity purchasers who see it as a growing commercial concern that will operate according to all of the commercial laws and practices in Australia — competing against Qantas, competing against other international carriers if it continues on international routes, or other regional carriers on other regional routes.

Ali Clarke: This is the voice of Tourism Minister, Simon Birmingham. You are listening to ABC Radio Adelaide right now. To Brian Wilson, to Rob Sal, people are asking what's going to happen to my- well $2900 worth of cancelled Virgin flight credits? What's going to happen to my velocity points and all that sort of stuff? We can't answer that at the moment and neither can the Minister because that will actually go through the voluntary administration process. However, Martin from Clarendon has called. Good morning, Martin. What question do you have?

Caller Martin: Just in terms of the bigger picture for viable airlines- for the two viable Airlines. Is the Government going to have another close look at the effect of the high airport charges due to our monopoly airport situation? And I'm not talking about Adelaide in particularly really but in the eastern states especially.

Ali Clarke: Simon Birmingham?

Simon Birmingham: Been- have been working through a very thorough process that the ACCC and others have been looking at in terms of airport charges because the airports themselves are highly distressed and suffering financial challenges at present as well.

So we will make sure that all aspects of competition — be it the pricing of the airlines or the pricing at the airports that apply to the airlines — are closely scrutinised and that we will try to uphold those competition principles.

I do want to say, particularly [indistinct] for Virgin employees as well, it's important to know that the administrators can continue to access the JobKeeper payment, so there should be no need for changes there in the short term that would impact negatively on employees; many thousands of whom already lined up to be receiving those JobKeeper payments the Government is providing. And of course, that employees’ entitlements are ultimately underwritten by the federal government through the types of programs we have in place, although our aim is first and foremost to save those jobs.

David Bevan: Minister Birmingham, you can't guarantee we'll always have two carriers. If we are left with just one airline will the Federal Government police prices to stop Qantas gouging customers?

Simon Birmingham: Well, David, we’re some way off that and we'll cross that bridge if we come to it — but it's a bridge we don't want to get to. We want to see competitive domestic aviation in Australia. Our view is that that necessitates having two airlines in place.

Now, we're not going to throw a blank cheque at that problem but we are certainly going to engage constructively with the administrators with assurance that best practice competency principles will be applied and do all we can to hopefully see new owners or a new structure emerge that allows Virgin to- to operate in some form in the future.

David Bevan: But is there any excuse for Qantas to jack up prices?

Simon Birmingham: No and certainly our competition policy approach will be one to make sure that consumers are getting competitive prices — so that's crucial for tourism industry and its recover as well.

All of the media headlines might be dedicated towards the big airlines, but of course there are thousands and thousands of other tourism and travel related businesses across Australia doing it incredibly tough at present. And that's why we're providing billions of dollars of support through JobKeeper and other payments to small and medium-sized businesses to try to sustain them all to the other side of this crisis.

Ali Clarke: As Tourism Minister, Simon Birmingham, when do you think we will travel again? And have you had conversations that might make as able to travel domestically before internationally?

Simon Birmingham: I think the second part of the question, Ali, is a reasonably easy one to answer at present, and that is that it is more likely that some of the domestic travel restrictions would be lifted before the international travel restrictions could be lifted. And that's a function of the fact that Australia is doing remarkably well in terms of containing the spread of COVID-19 and that hopefully, that may provide the ability for people to travel more freely across Australia in the months to come — I’m not saying the days or even weeks but at least perhaps in the months to come. Internationally I think is- is going to be tougher given we see just how uncontrolled the spread is in much the rest of the world.

Ali Clarke: This year?

Simon Birmingham: Internationally? I don't- I don't know.

Ali Clarke: Okay.

Simon Birmingham: I wouldn't want to try to predict.

Ali Clarke: Okay. Alright thank you very much for your time.

Simon Birmingham: Thank you.

Ali Clarke: Tourism Minister, Simon Birmingham. Appreciate that.

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