Virgin Australia: Corporate structure readied for return to international flying and ownership

The new owners of Virgin Australia (VA), Bain Capital have revived a shell company used to avoid foreign ownership restrictions on Australian airlines. Boy, is that going to piss Qantas off!

The SMH is reporting that Virgin Australia International Holdings (VAIH) – a vehicle used by the previous owners of VA to get around the 49% limit on foreign ownership for Australian airlines operating international flights, is back in operation.

Qantas is bound by the 49% foreign ownership limit, and can’t use the VA workaround due to the legislation passed when the airline was privatised.

What this means

A couple of things – VA will need the flexibility the shell company provides if it wants to exceed the foreign ownership limit, and if it re-commences international flights, which have been suspended since it went into administration back in April 2020 near the start of the pandemic.

Perhaps international flights for VA are closer than previously indicated, contradicting its earlier claim to be concentrating on getting its ‘mid-market’ domestic strategy right before it moved on to international?

VA has already made routes to New Zealand available for booking from March 2021 and wants to retain its potentially lucrative landing slots at Tokyo’s Haneda Airport.

2PAXfly Takeout

The aviation industry has a difficult road ahead when it comes to sustainability. It’s going to require a relative revolution in technology, with ‘electric planes’ or hydrogen planes, or some form of jet engine that doesn’t require a carbon based fuel. And that is going to require the development of an alternative to jet engines probably.

It’s a big ask. It will take time to develop.

This move to home grown and manufactured SAF is a first step – maybe even a baby step in a very long road of innovation. In the long run, US$200 million won’t even touch the sides.

The previous owners of VA used the same mechanism to beat the foreign ownership limits. The Australian Government should have acted to limit this loophole if it really wanted to control foreign ownership.

With the domestic market hotting up with the introduction of REX to the capital city flight mix, I would have thought VA had enough on its plate in a competition sense.

International flying is a much more risky enterprise for VA, and they don’t have the A330 or B777 fleet they previously used for this purpose any more. Their existing B737’s can get them to New Zealand, but not the USA or Japan. For those destinations, they will need new long haul jets, complicating their maintenance and servicing costs, not to mention their air crew needs.

I think they are just shoring up their agility in reaction to changed market conditions. I don’t see this as necessarily meaning they are bringing their international timeline forward.

Actually, with current domestic border restrictions on NSW and Victorian residents, they are not flying much at all.