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Virgin disputes Qantas “sham” characterisation of international structure

written by WOFA | December 2, 2013

A Virgin Australia 777 used for international services.
A Virgin Australia 777 used for international services.

Virgin Australia has taken issue with reported Qantas comments that the structure of its international operations are a “sham”, saying it fully complies with legislation requiring Australian international airlines be majority Australian-owned.

According to a Financial Review Sunday report which aired on the Nine Network on Sunday, Qantas CEO Alan Joyce has written to Deputy Prime Minister and Transport Minister Warren Truss asserting that Virgin Australia’s domestic operation, which is majority foreign owned, effectively controls Virgin Australian International Holdings (VAIH), and that Virgin’s recent rights issue, which will see Air New Zealand, Eithad and Singapore Airlines gain representation on the Virgin Australia board, means foreign entities effectively control Virgin’s international operations.

In a statement Virgin Australia responded: “Virgin Australia International Holdings Pty Ltd is fully compliant with the Air Navigation Act (ANA) which limits foreign ownership of Australian international airlines to 49 per cent. The VAIH structure is majority Australian-owned and controlled; and governed by a majority independent board of directors, including an independent chairman.”

Virgin Australia International Holdings’ board is chaired by Graham ­Bradley, also chair of HSBC Australia and Stockland, with board members including Business Council of Australia president Tony Shepherd and former Labor finance minister Lindsay Tanner.

“Under VAIH’s constitution, at no time can the interests of foreign persons in VAIH exceed the foreign ownership levels prescribed by the ANA. The constitution also guarantees that at all times at least two-thirds of VAIH’s directors are Australian citizens,” continued the Virgin statement.

“VAIH notes that the structure is comparable to those that have been used by other airlines around the world, including a structure currently used by our major competitor in overseas markets,” the statement concluded, in reference to Qantas Group shareholdings in its various Jetstar operations in Asia.

Virgin Australia International Holdings was created in March 2012 to ensure continued compliance with the foreign ownership cap where then current Virgin Australia Holdings shareholders were issued shares at the ratio of one VAIH share for each VAH share held  (with a nominal value of of $0.000001 per share), which would then be held in a trust company. At the time Virgin’s major foreign shareholders were the Virgin Group (26 per cent) and Air New Zealand (19.9 per cent).


The letter is Alan Joyce’s latest front of attack against Virgin Australia, in which he calls his competitor a “newly-minted sovereign-owned airline”. The letter is perhaps less about harming the relatively small Virgin Australia International operation itself than it is about again highlighting what Qantas sees as the uneven playing field created by restrictions of the Qantas Sale Act, and in creating a sense of urgency that the federal government needs to act quickly to shore up Qantas’s financial position to stave off “junk” ratings by ratings agencies, which would significantly increase the costs of its debt borrowings, at a time that, according to Qantas’s version of events, Virgin Australia is being propped up by international airlines intent on harming Qantas.

According to media reports, Qantas has petitioned the government to provide support ranging from debt guarantees to taking a small shareholding in the airline.

But Prime Minister Tony Abbott has told radio 4BC that “I’m not sure that they [Qantas] really want to see a new government shareholding. And the trouble with providing a government loan guarantee is, where does that stop? Once you started giving it to one business, why shouldn’t you give it to other businesses?”

Said the Prime Minister: “”We need Qantas to, I guess, settle on what it wants.”


  • travelhound


    As Far as I can see VAIH is simply an operating entity of Virgin Australia, with the only exception being a structural separation through the appointment of an independent board (with two of the five member board being representatives of VAH) allowing it to pass an independence test.

    VAH has an exclusive service agreement with VAIH supplying all services to the entity including staff, aircraft, management expertise and financial assistance through a loan agreement. VAA an entity of VAH guarantee the VAIH operation.

    Shares in VAIH are nominally priced at $0.000001 per share, are non transferable and have no voting rights. The VAIH entity was structured to have limited nominal value. Shares in VAIH were issued to existing VAH shareholders through a in specie dividend with holders of VAIH shares advised at the time of placement to not expect any distribution of income or capital from the company.

    Now, I don’t know about you, but if I was at an airport and some nice chap came up to me and asked me to be a nice chap and put some of his belongings in my luggage because he was over his 20/25/30 kg limit, on common sense grounds I would say no.

    We know form the statements to the market the sole purpose of this entity is to allow Virgin Australia to circumvent Foreign Ownership requirements under the Air Navigation Act, the majority Australian shareholders are simply puppets for other interests and the entity has no real commercial or other operative purpose.

    I think we have actually got a fairly healthy competitive market at the moment. We are in a far better place than we were ten years ago, not to mention twenty years ago.

    At the end of the day it is the governments responsibility to enact policy and enforce legislation. By the looks of things we have the heads of airlines expecting aviation policy to be set by the best PR machine.

  • Freddie


    What a luxury for Qantas that the Government want to ‘see what Qantas want to do” It’s a pity that the Government didn’t afford Ansett the same consideration. If they were still around Qantas would cease to exist….unless of course Qantas received a Government hand out yet again.

  • Roo Boy


    Qantas runs the same company structure to run Jetstar but that ok because it suits them .. As a Qantas shareholder I state that Alan Joyce should be sacked.. This is a Qantas smear campaign on Virgin as they have now become a fair competitor in the market place taking on Qantas in the business market for the first time over the last 6 months. Look carefully in the background & in the article above & note that Qantas has been raising over $1.2B over the last few years & it can not repay these funds so its credit rating will take a hit so what does it do ?? It smears Virgin by stating that its being propped up by Internationals .. hang on aren’t they investing just like your funders ? It’s the old pot calling the kettle black .. Qantas you are not the national airline you are owned by shareholders just like Virgin capped at 49% foreign ownership just like Virgin so Alan get off your little soap box & start competing & stop expecting the Government to bail you out ..

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