Nationalise Virgin, Qantas next in line

Virgin and Qantas planes
The climate crisis demands that we reduce polluting air travel. A publicly-owned and community-controlled national transportation system, including Virgin and then Qantas, would help move in that direction. Cropped photo by: shebalso/Flickr (CC BY-SA 2.0)

“The cuff-linked bottom-feeders are now preying over the carcass of Virgin Australia, 10,000 jobs are on the line, the government is dithering and Qantas circles, the famishing spectre of a monopoly in its sights. This is not about bailing out Virgin, it’s about bailing out the banks,” independent journalist Michael West wrote on April 22.

West was commenting on Virgin Australia management’s announcement, the previous day, that the airline company had been placed into voluntary administration. Virgin collapsed under the pressure of more than $5 billion in debt and a cash flow crisis caused by COVID-19 pandemic travel restrictions.

The company also failed to gain additional financial support from its international shareholders — Singapore Airlines, Etihad Airways, Chinese carriers HNA Group and Hanshan and Richard Branson’s Virgin Group — all of which have serious financial problems of their own. The sale of Virgin is likely to wipe out the value of their investments. And, since much of the debt is unsecured, many of the lenders will probably lose out badly while most may get nothing back.

The federal government has refused Virgin CEO Paul Scurrah’s plea for a $1.4 billion bail-out. Federal treasurer Josh Frydenberg reiterated on April 21 that the government wanted “a market-led solution”. “Our objective is two commercially viable, major domestic airlines operating in Australia.”

Virgin management said it had entered voluntary administration to “recapitalise the business” and emerge “in a stronger financial position on the other side”. Deloitte administrator Vaughan Strawbridge said there had been an “extraordinary” amount of interest in buying Virgin, with more than 10 groups involved.

Strawbridge claimed there were no immediate plans for redundancies and that employee entitlements had to go through the restructure process. He said workers will continue to be paid or, if stood down, they would be able to access the JobKeeper payment. Some 8000 out of 10,000 direct employees were stood down in March.

Job security

But there are no guarantees of job security if any new private owners, especially predatory private equity scavengers, eventually take over Virgin.

Unions say that the government’s failure to take action to help Virgin Australia will cost it more in social security and lost income tax.

Australian Licensed Aircraft Engineers Association federal secretary Steve Purvinas said he is concerned about the 10,000 direct employees and 6000 indirect employees who may lose their jobs.

Australian Council of Trade Unions president Michele O’Neil said on April 21 that if the federal government does not immediately intervene it will be responsible for the “biggest airline collapse in Australia’s history”. She said it had watched this coming for four weeks and done nothing.

But, she said, it is not too late. “Virgin Australia can still be rescued. It must keep trading in administration, and then come out of administration with new shareholders that include the federal government.”

The ACTU is campaigning for the federal government to save the 16,000 jobs and “avoid handing Qantas a monopoly”.

Taking public equity in Virgin, rather than a government hand over of taxpayer funds for no ongoing return, would be a step forward.

Nationalisation

A better alternative, however, would be the full nationalisation of Virgin Australia, as part of a move towards a fully publicly-owned airline industry and mass transport sector.

It could be a step towards reducing a highly polluting form of transport. A publicly-owned and community-controlled national transport system is essential to drastically reduce carbon pollution in a climate challenged world.

As West commented the “cleanest solution to the Virgin crisis” is for the government to compulsorily acquire (under Section 51 of the Constitution) the planes and the people — “the assets not the shares”.

“This is not a bail-out”, he said, “It is an emergency measure in the public interest … that would see off the foreign shareholders, creditors too, who have refused to invest any more capital in their airline, preferring instead to plead for taxpayer aid.”

The Australian Greens leader Adam Bandt supports the federal government buying Virgin. “Not only will the public get an airline at bargain basement prices, it may be the only way to save jobs, ensure competition and keep us connected in a carbon-constrained world”.

He warned though that, “If ideology gets in the way and Virgin falls over, or another buyer swoops in ahead of the government, we will all ultimately pay for it through job losses and higher fares.”

We will also pay from the associated ecological costs of air travel when the lockdowns are lifted. The full nationalisation of Virgin could be one step along the pathway towards a fully publicly-owned airline industry and mass transport sector, including the establishment of a national high speed rail service.

The climate crisis demands that we reduce polluting air travel. A publicly-owned and community-controlled national transportation system, including Virgin and then Qantas, would help move in that direction.

The airline industry crisis has been exacerbated, not caused, by the COVID-19 pandemic. It could be the detonator for a radical transformation of this country’s long-sought after need for an ecological long-distance mass transport solution.