Qatar Airways is reportedly in talks to acquire a 20% stake holding in Virgin Australia. The report, which was carried by the Australian Financial Review, has not been formally confirmed by either Qatar Airways or by Bain Capital, the owner of the airline Virgin Australia.
This potential deal could significantly impact the Australian aviation landscape, increasing competition and potentially leading to lower fares for travelers.
According to the Australian Financial Review, the interest by the Qatari carrier may be announced as early as next week.
Why the Interest in Virgin Australia?
Industry analysts believe Qatar Airways is looking to expand its presence in the Australian market. Previously, the airline’s efforts to secure additional flying rights were blocked by the Australian government in 2023.
Virgin Australia, on the other hand, is seeking ways to compete more effectively with Qantas, the dominant airline in Australia.
The two major carriers have maintained a long-standing duopoly in the Australian aviation market.
Partnering with a strong international player like Qatar Airways may be seen by some as a benefit for Virgin Australia.
A partnership with the Qatari carrier could potentially equip Virgin Australia with a strategic advantage over its rival.
According to the Australian Financial Review, a competitive advantage is not expected to be an immediate outcome. Relevantly, Qatar Airways and Virgin Australia already operate a code share agreement.
The Approval Hurdle
Even if supposed negotiations between the two airlines were to be successful, the deal still faces a crucial hurdle. Any such move would require approval from the Australian government.
The Foreign Investment Review Board will need to assess the potential impact on competition and national security before giving the green light.
Conclusion
Virgin Australia only recently moved back into the black, with the airline returning to profitability in FY 2023 after a decade of losses. In April 2020, the carrier went into voluntary administration, citing its inability to continue operations without a Federal Government bailout.
In November that year, it then became the first major Australian airline in history to exit voluntary administration.
Rebounding from the blow, it sought to maintain its pre-pandemic market share of roughly one-third of the Australian domestic aviation market.
Positioning itself as a mid-market carrier, Virgin Australia’s target has been maintained. As at March 2024, the airline is maintaining its planned one third market share, with Qantas claiming the rest.
If the deal for a Qatar Airways 20% stake does become a reality, it could potentially benefit Australian travelers in several ways.
Increased competition between airlines has the potential to lead to lower fares on both domestic and international routes.
While the initial reports of discussions appear to hold some credence, a financial stake holding would still require regulatory approval.
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