I’ve been having a long and hard think about the situation with VA over the last few days, as I am sure many have been as well. And I am of the opinion that the federal government should effectively nationalise the carrier. This would go a long way to protecting important jobs, not just for the carrier, but for the domestic tourism industry as well.
1. It is not without precedence that a national government has done this. Air New Zealand readily comes to mind. Yes, the situation is quite different for many reasons, including just being the sole, major carrier for a nation.
2. Government owned entities have competed against independently managed on several occasions and across several sectors. For a period of time the CommBank was competing against the likes of ANZ, NAB, and Westpac before being sold off. Telstra competed against Optus before being sold off; NBN has competed against several telco’s before rollout and legislation demanded otherwise.
3. The federal government offered a city monopoly to SAC (Sydney Airports Corporation) with SWZ before undertaking the effort itself with the intention of making it public at an appropriate time.
And some additional points:
- By nationalising VA, the government could impose the same foreign ownerships caps as applied to QF when it comes time to sell, making the playing field level.
- Have the VA, Lazarus with a triple by-pass, overseen by an independent auditor to ensure the efforts to improve profitability, restructure and reduce debt is being maintained by management and the board.
- Impose a strict timeframe of involvement by stipulating that government ownership will reduce progressively from 100% to 0 over the course of 3-5 years. Without significant improvement, replace management and/or board as per the above point.
- Offer government secured bonds at RBA rates, currently at 0.25%, for up to AU$2B to other Australian carriers, with commesurate increases for amounts above, and also with similar terms to the Virgin rescue. I.E. Repayment of 50% within 3 years, full in 5 years, or additional interest must be forthcoming.
Given the substantial financial injection given by the Australian Government to the economy to date, I don’t personally believe that undertaking a measure to the tune of AU$5-10B across up to 5 or so years to be such a back breaker to the greater economy.
The government acted as a bank to “The Banks” during the GFC and would be, for all intents and purposes, doing the same to the airline industry. I am of the view that this will assist with recovery, when lock down/isolation begins to ease, for both the business and tourism sectors.
Thanks for your time.
B707, B717, B727, B734, B737, B738, B743, B77W, A300, A320, A332, A333, A339, A388, BAe146, Cessna 206.