For several weeks now, there have been rumors that Qatar Airways could invest in Virgin Australia. Well, this is now official, as details of the plan have been announced. This investment has major implications, as it will see Virgin Australia resuming long haul flights… sort of.
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Qatar Airways to invest in Virgin Australia
Qatar Airways Group has announced its intention to acquire a 25% minority stake in Virgin Australia, in a deal that could shake up the Australian aviation market. Qatar Airways is of course owned by the Qatari government, while Virgin Australia is owned by Bain Capital, and has been wanting to go public.
This deal requires approval from Australia’s Foreign Investment Review Board, and it’s possible that the government may block the transaction, especially with Qatar Airways being owned by a foreign government.
As you’d expect, this investment is largely about building closer ties between the two airlines. The two airlines argue that a strategic relationship will drive increased competition in Australian aviation, and will ensure Australian consumers have access to better value airfare and greater choice. This is also intended to serve as a cornerstore investment ahead of any anticipated return of Virgin Australia into public ownership.
Qatar Airways and Virgin Australia have had a partnership since 2022, including a codeshare agreement, reciprocal loyalty benefits, and more. On the surface, people might be confused by this partnership. Qatar Airways and Qantas both belong to oneworld, so you’d think that the two airlines would have close cooperation. Well, that’s very not much the case, despite their shared alliance membership:
- Qantas has a joint venture with Emirates, so prioritizes that partnership over the one with Qatar Airways
- For years, Qantas has been actively trying to block Qatar Airways’ growth in Australia, as Australia’s government has protectionist policies in place for Australian airlines
Emirates is treated much better by the Australian government than Qatar Airways, and that largely comes down to Qantas’ support of Emirates:
- Australia’s bilateral agreement with the UAE allows for 168 weekly flights to Australia’s four main airports
- Australia’s bilateral agreement with Qatar allows for 28 weekly flights to Australia’s four main airports
In both cases, Australian airlines don’t fly to either airport, so why should Emirates and Etihad have access to 7x more flights in Australia than Qatar Airways, when both countries have airlines with the primary business model of connecting travelers to other countries?
Well, part of this investment is intended to address that imbalance…
Virgin Australia plans to resume long haul flights
As I had speculated when this investment was first rumored, there’s a fascinating angle here that the airlines are pursuing. In 2020, Virgin Australia restructured, and as part of that, the airline discontinued long haul flights, retiring its Boeing 777s and Airbus A330s. Well, the goal is to resume long haul flights, with a twist. Assuming the investment gets approved:
- Around the middle of 2025, Virgin Australia will launch flights to Doha (DOH), from Brisbane (BNE), Melbourne (MEL), Perth (PER), and Sydney (SYD)
- These flights are intended to feed into Qatar Airways’ global network, opening up more than 100 connecting itineraries across Europe, the Middle East, and Africa
- Virgin Australia would operate these flights on a wet lease basis with Qatar Airways, meaning that Virgin Australia would simply market these flights, but they’d be operated by Qatar Airways aircraft and crew
- As it’s described, this initial wet lease agreement is intended to “assess the longer-term merits and viability of wide-body aircraft flying while providing Australians with greater local competition for their long-haul travel needs in the near-term”
It’s kind of funny that Qatar Airways has acquired some former Virgin Australia Boeing 777s, and has maintained the interiors. So Qatar Airways could start operating former Virgin Australia aircraft on a wet lease basis on Virgin Australia marketed flights. Goodness, isn’t this a fun industry?!
What a fun airline investment!
In general, I’m skeptical of airlines investing in other carriers, as there’s not a great track record of success for this. That being said, Qatar Airways investing in Virgin Australia has to be one of the smarter plays we’ve seen so far.
Don’t like the bilateral agreements a country is giving you? Just buy an airline there, and all your problems will be solved! 😉
In all honesty, the Australian government hasn’t been acting in the best interest of consumers, by allowing Qantas to have such a dominant position in the country, all while protecting the company’s joint venture with Emirates, and blocking competitors from expanding.
It’s just absurd that Emirates and Etihad are allowed to operate 7x as many flights to the four biggest airports in Australia as Qatar Airways. With Australia’s government being unwilling to change its stance, Qatar Airways is now being creative with expanding service to the country.
Now, I can’t help but wonder if the Australian government may try to block this, arguing that Qatar Airways is trying to circumvent the rules. After all, Qatar Airways is maxed out on flying to Australia, so the company’s solution is to buy an Australian carrier, and simply have that airline market its flights, in order to allow for an expansion.
One thing is for sure — this arrangement would be hugely beneficial to the Australian traveling public. Currently Australia essentially has one global carrier, while this would add a second competitor, giving some much needed competition to Qantas and Emirates.
For what it’s worth, Qatar Airways already has a pretty robust portfolio of airline investments. Qatar Airways owns a 20% stake in IAG (the parent company of British Airways, Iberia, and Aer Lingus), a 10% stake in Cathay Pacific, and a 10% stake in LATAM. However, these aren’t terribly “active” investments, which is to say that these are well established airlines that mostly have a track record of profitability, and Qatar Airways didn’t come in with the goal of changing these airlines.
Qatar Airways also recently announced plans to buy a 25% stake in South Africa’s Airlink, and is nearing a stake in RwandAir, given that Qatar’s government is a major shareholder in the country’s new airport.
Bottom line
Qatar Airways is buying a 25% stake in Virgin Australia. The oneworld carrier has been trying to grow in Australia, but has been prevented from doing so, as Qantas has been campaigning against the airline. That’s why Qatar Airways and Virgin Australia have a partnership in the first place.
While airline investments often don’t end well, I imagine Qatar Airways sees this as a strategy to grow in the country. The goal here is for Virgin Australia to operate flights from Australia’s four biggest airports to Doha, using Qatar Airways aircraft, on a wet lease basis.
What do you make of Qatar Airways investing in Virgin Australia?
Wonder whether this has any future implications for the VA-UA partnership.
Lucky, your choice of 'sneaky' is perplexing to say the least.
No one has mentioned the unions. The VA unions (if they have them?) might shoot themselves in the foot, but could contest the wet leases...or just accept it's a win-win...
Yes, they do have them, and having been cooperative early in the administration period when they were understandably concerned about the survival of the airline and their jobs, now the airline is returning operating profits they are becoming more active. VA's former wide-body crews have moved on so this is a new business activity and there are no existing staff conditions to protect. During the initial stages of this venture the unions are unlikely to...
Yes, they do have them, and having been cooperative early in the administration period when they were understandably concerned about the survival of the airline and their jobs, now the airline is returning operating profits they are becoming more active. VA's former wide-body crews have moved on so this is a new business activity and there are no existing staff conditions to protect. During the initial stages of this venture the unions are unlikely to object, but if long haul operations become permanent, both the unions and the federal government and regulators are likely to increase pressure for them to use staff employed under Australian conditions.
The unions have largely accepted Qantas' wet lease from Finnair but that already has a three-year life after which they will use Australian crew.
And if at first you don't succeed, just start a hedge fund as Qatari government with an office in some Billabong City and let that one invest in both Qatar Airways and Virgin Australia. Usually the sheiks get what they want, one way or the other.
Indeed would be surprised if this gets through. Recall SQ attempted a similar arrangement with Ansett. The Federal Government blocked it in the best interest of the national carrier Qantas. I so want this to happen however very doubtful
The previous incarnation of Virgin Australia had ownership interests held by SQ, Etihad, Air NZ, and Hainan Airways at various times. So I don't see why a Qatar stake would be an issue?
The Government recently blocked Qatar adding flights to AUS. This is to protect QF. More a political move Maybe not the case now as the backlash from the public has been strong. QF reputation in AUS well let’s just say not much better than a 3 star airline and that is being generous.
"In both cases, Australian airlines don’t fly to either airport, so why should Emirates and Etihad have access to 7x more flights in Australia than Qatar Airways"
168/28 is exactly 6, not 7 or even 8 (as "7x more" would actually mean 8x as many). So Emirates and Etihad have access to 6x *as many* flights as Qatar Airways, or *5x more*
Don’t like the bilateral agreements a country is giving you? Just buy an airline there, and all your problems will be solved!
Emirates should then buy Condor to access more German destinations.
It is impossible to predict how politics play out but a 25% stake should not be problematic in size for most countries. QR could have bought the whole company or taken a majority stake but the fact that they did not says they are looking for a bigger way into the Australia market or for the deal to be denied so they can harp on it.
There are implications for other countries to which Virgin...
It is impossible to predict how politics play out but a 25% stake should not be problematic in size for most countries. QR could have bought the whole company or taken a majority stake but the fact that they did not says they are looking for a bigger way into the Australia market or for the deal to be denied so they can harp on it.
There are implications for other countries to which Virgin Australia could fly; while QR does have stakes in other airlines, the calculus changes when a government backed airline goes on a buying spree with the intent to expand into other countries.
The chances that Virgin Australia will only serve Qatar in a few years is slim to zero.
Another erroneous opinion comment.
QR can't practically buy all of VA because there are foreign ownership restrictions in Australia.
Domestic airlines can be 100% foreign owned.
International airlines can be max 49% foreign owned.
Virgin Australia and Bain Cap have got round this by creating Virgin Australia International for international flights with a convoluted shareholder structure. However it is likely the government could challenge that structure if they wanted...ie if Qatar tried the...
Another erroneous opinion comment.
QR can't practically buy all of VA because there are foreign ownership restrictions in Australia.
Domestic airlines can be 100% foreign owned.
International airlines can be max 49% foreign owned.
Virgin Australia and Bain Cap have got round this by creating Virgin Australia International for international flights with a convoluted shareholder structure. However it is likely the government could challenge that structure if they wanted...ie if Qatar tried the same structure and Qantas complained.
I think VA will still be flying to Doha in a few years if the investment happens. This strategy is only the same as Qatar has done with IAG.. their Eastern network now focussed on Doha and BA and IB flying to Doha to fill planes. And Qatar with Cathay. No other reason these airlines would fly to Doha other than Qatar feed and Qatar leveraging their investment. And in fact Delta has done with LATAM. No way did LATAM want to fly to Atlanta over Miami. AA was their natural partner. But they had no choice...they needed the money and Delta made them move to Atlanta. DL promised they would build connections in Miami for them but those failed massively.
How many of the 168 rights do EK and EY use? Based on my knowledge of current service, they can't be even close... if I remember correctly EY only operates SYD 7x weekly now and doesn't fly to BNE or PER. I assume they must be leaving like half the rights on the table, or something...
Perth is a wealthy city, but with EK and QR both sending A380s and Qantas staging their Euro non-stops from there, there's only so much juice that can be squeezed from the plum. There's a similar story in Brisbane.
Have Qatar actually applied for additional flights to Australia? Isn't that a lot easier than purchasing another airline?
Qatar did apply, but the Minister for Qantas Catherine King denied the traffic rights.
That was about 17 months ago before the public outcry about the denial.
I mean did they apply again now that Alan Joyce is finally gone.
I wouldn't call it a "public outcry". Given the "female examination" scandal (now THAT was a public outcry), the Qatari government's sheltering of Hamas terrorist leaders, and Qatar Airways' shocking industrial relations record, it was no surprise they got turned-down. The fact that the entire federal government and many of their family members are invited members of Qantas' Chairman's Lounge program (think Concierge Key or Global Services) had nothing to do with it, I'm sure...
I wouldn't call it a "public outcry". Given the "female examination" scandal (now THAT was a public outcry), the Qatari government's sheltering of Hamas terrorist leaders, and Qatar Airways' shocking industrial relations record, it was no surprise they got turned-down. The fact that the entire federal government and many of their family members are invited members of Qantas' Chairman's Lounge program (think Concierge Key or Global Services) had nothing to do with it, I'm sure (/sarcasm).
“Genius & Sneaky”
I don’t think I’d describe the transaction as Sneaky. I’m sure all the players involved (including the Australian aviation authorities) understand what’s going on. As far as Genius, that also depends on final approval by the Aussies. Should the investment get approved, it is a very strategic play by Qatar. Since the dark days of Middle East air space ban, Qatar Airwsys seems to have more and more wins in their court.
It's simply a turn of phrase. I wouldn't read too much into it.
I wonder if Qatar being blocked also has to do w/ the Australian women being violated in an invasive strip search in 2020? Perhaps they are not so fond of an airline in their country that is willing to do something like that.
I’m sure the women in australia felt violated when they were forced to undergo a certain medical procedure in order to be able to participate in society… your body, your choice* *but only for certain aspects…
I am sure that this has been a major factor in denying Qatar more flights. Imagine you are a typical female passenger, and while on the plane expecting to leave Doha you are hauled off the plane, and then subjected to an invasive strip search tantamount to rape. Simply appalling, and I for one cannot blame the Australian government for penalising Qatar.
I'm sure it was a very convenient reason for the Australian government to use. And for Qantas to push. Qatar government apologised for this and said it should have happened. I am sure you can find violations for the UAE too. They like to pose as liberal but they can still be strict.
"Currently Australia essentially has one global carrier, while this would add a second competitor, giving some much needed competition to Qantas and Emirates."
I'm not sure if I agree with this statement. Australia has one local carrier that flies internationally, with arguably limited "global" routes. However, the international airfare market is extremely competitive, even if you discount Emirates and Etihad. Think Singapore Airlines, Cathay Pacific, Malaysia Airlines, Japan Airlines, ANA, Korean Air, Asiana, Garuda, Korean...
"Currently Australia essentially has one global carrier, while this would add a second competitor, giving some much needed competition to Qantas and Emirates."
I'm not sure if I agree with this statement. Australia has one local carrier that flies internationally, with arguably limited "global" routes. However, the international airfare market is extremely competitive, even if you discount Emirates and Etihad. Think Singapore Airlines, Cathay Pacific, Malaysia Airlines, Japan Airlines, ANA, Korean Air, Asiana, Garuda, Korean Air, Thai Air, and even more if you count European, American and mainland China based airlines.
"Australia has one local carrier that flies internationally, with arguably limited "global" routes."
No airline flies everywhere. Qantas flies to every continent on Earth (even Antarctica if you count their sightseeing flights), and has the only non-stop flights from Europe to Australia, which cover London, Rome and Paris, with Frankfurt likely to be added soon. That's pretty global.
This is great news! I think it is likely it will get approved - as there was a LOT of media and public backlash here in Aus when the government blocked Qatar’s request for more flights and with the cost of living crisis and an upcoming federal election early next year it will be hard for the government to justify blocking this when it will drive down airfare prices and help consumers… aka voters!
This is great news! Australian aviation needs more competition, and more Qatar Airways will definitely help!