Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Tuesday, 21 April 2020
LEON BYNER: As you heard earlier this morning on 5AA, Virgin Australia has gone into voluntary administration. Basically that means that the auditors will step in and they will continue to run the business and hopefully trade their way out of what has been a very heavy circumstance to weather certainly from a money point of view. There are those who argue well Virgin was in trouble anyway. But of course, my point to that is, yes they were but they were shut down. They were shut down. So what we have got now is a battle between two airlines to see who has got the deepest pockets. That doesn’t necessarily help Australia when eventually we will reinstate tourism and flying both nationally and internationally. Let’s talk to Finance Minister Mathias Cormann. Mathias, thanks for coming on the program today.
MATHIAS CORMANN: Good morning Leon. Good morning to your listeners.
LEON BYNER: Can I ask you first of all, given that you have shut down effectively, for good reason and for health reasons, the airline industry is virtually is on a less than skeleton flight schedule which is putting massive financial pressure on all fliers. What responsibilities does the Federal Government think it has to airlines in this predicament?
MATHIAS CORMANN: We have the same responsibility as we have to all businesses and all working Australians, that is to provide appropriate levels of support. We have provided support to the aviation sector. They are eligible, like any other business that has had a very significant drop in turnover, for the $130 billion JobKeeper program for their employees. They are also eligible and have received support through our fee relief package of more than a billion dollars. Beyond that we have contracted both Virgin and Qantas to maintain a number of domestic and international routes for which we are paying them directly, in the absence of the same level of passengers that have been in place before. But the issue with Virgin is, it is a business that had difficulties prior to the coronavirus crisis. Yes, the coronavirus crisis has brought things to a head. But we do need to consider these things in an orderly fashion. Any ask of $1.4 billion in taxpayer funded support is very, very significant. You do want to make these judgements carefully. Our starting position is that for any business in trouble, the first responsibility to bail out any such business is with the existing owners, the existing shareholders. With Virgin, they have some very significant shareholders. Singapore Airlines and Etihad airlines both own twenty per cent. You have forty per cent or thereabouts owned by two substantial Chinese investors. Then Richard Branson who through his company owns about ten per cent. If those shareholders are not prepared to step up, the next step is to properly test the market to see if there is any other private sector interest to buy or to invest or to help recapitalise a restructured, refocused business which is focused on its performing, viable, profitable parts. That is the process that is now underway. That is the process that the Government will engage with over the next few days and weeks.
LEON BYNER: Anthony Albanese was just on this program saying that if it was his call he would be putting a state share in Virgin to later, when it got off the ground to get their dividend back. You do not want to do that do you?
MATHIAS CORMANN: The Government is not in the best position to properly assess and quantify the risk here. Furthermore, we believe it would be irresponsible for us to make these sorts of decisions before all of the private sector opportunities have been properly exhausted. We are quietly confident that through this process now there will be interest in a restructured, refocused second airline in Australia. That is the process that is going to take place now. As a Government, we want to see a second airline, but we want to see a second viable and profitable airline. For the Government to step in without a clear private sector led plan for the other side would not necessarily give us the right opportunity to have a viable and profitable airline on the other side.
LEON BYNER: If any of the international investors decided to put in funds, including the two Chinese airlines would that then create an issue with the Foreign Investment Review Board?
MATHIAS CORMANN: I am not going to go through any potential future permutations. There is a process that will now take place, guided by the administrator. He will have to engage with all of the creditors. Part of the problem is that Virgin carries substantial levels of debt. All of these things will need to be addressed in the next few days and weeks. We will have to see who comes forward in terms of buying the business from here, or participating as a new shareholder in the recapitalisation and restructuring of this business to make it successful on the other side.
LEON BYNER: Presumably you really want Virgin to survive, don’t you?
MATHIAS CORMANN: Yes, we do want to have a second airline, because we do believe that competition in the aviation sector in Australia is important, is in the public interest. That is certainly the case. We believe that this process offers us the best possible chance to have a viable and profitable airline on the other side of all of all of this.
LEON BYNER: Now, just on a couple of other things is there any thought within Cabinet to think about lifting some of the restrictions given that it is looking a lot better that we are not getting the repeat cases of coronavirus that was first mooted.
MATHIAS CORMANN: It is looking a lot better because we have taken very strong and effective action early. Certainly earlier than many other countries around the world. We have to be very careful not to lift restrictions too early. Some countries that had a very strong start like for example Singapore, when restrictions were eased, they were on the receiving end of a second wave. We will be guided by the medical advice. Of course we would like to be able to ease restrictions. Of course we would like to be able to reopen those parts of the economy that are subject to severe restrictions right now. But we will only do so when the medical advice indicates to us that it is safe to do so.
LEON BYNER: Mathias Cormann, as Finance Minister, I will get you to clarify a couple of things, because many listeners ring up and ask this. First of all, the JobKeeper payments, they start flowing from 1 May correct?
MATHIAS CORMANN: Yes, early May. Actually they will be paid retrospectively, but the actual money will flow from early May. Yes.
LEON BYNER: Right and again, Virgin and other companies, I am sure that Qantas are doing the same thing, they are because they have had to stand down staff as well. What we don’t want though Minister, I am sure you would agree is a situation where businesses have got to sit out absorbing costs every day to the point where those with the deepest pockets will last longer, but when they come out of this, it is going to be a very different landscape to before they went in, isn’t it?
MATHIAS CORMANN: We have done our best to provide very broad support to the economy, very broad support to businesses, to help as many businesses as possible to remain in business, and as many Australians working for those businesses to remain in those jobs. But we cannot pick individual winners. Once you start involving yourself on an individual business rather than on a sector-wide and economy-wide basis, it becomes very, very complicated and not necessarily fair and equitable. We want to see as many businesses as possible survive through this period. That is why we have done what we have done. But in the end there will be businesses through this period that will fail. We do not believe that with Virgin we are in that position at this point. We do believe that the administration process offers the best chance for Virgin to continue as a viable and profitable airline on the other side.
LEON BYNER: Alright, Minister Mathias Cormann thank you for coming in this morning.