Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Tuesday, 21 April 2020
REBECCA LIVINGSTON: A real mixed response from you this morning, some people saying no, Virgin Australia didn’t run a good business, didn’t run things profitably, they don’t deserve a bail out from the Government. Then of course after twelve or so hours of speculation Virgin Australia confirmed that they entered voluntary administration. They said that they sought for financial assistance from a number of parties including the state and Federal governments to help them through this unprecedented crisis. However they were unable to secure the support. One of the people who said no is Finance Minister Mathias Cormann. Minister good morning.
MATHIAS CORMANN: Good morning.
REBECCA LIVINGSTON: What do you say to the ten thousand employees of Virgin Australia this morning?
MATHIAS CORMANN: The process that Virgin has entered into today offers the best possible opportunity from here to have a viable and profitable airline on the other side of this crisis. As a Government we provided very substantial support to the economy, to businesses around Australia and to working Australians working for businesses like Virgin though our JobKeeper program and specific support to the aviation sector. But in terms of Virgin as a business itself, there are a number of issues that will need to be resolved to ensure there is a viable and profitable business over the medium to long term. As a Government we do want to see two viable national airlines continue. We do want to see competition in our aviation sector for obvious public benefit reasons. But when a business faces these sorts of challenges the first responsibility to sort these challenges out rests with its owners, its shareholders. Virgin has very significant shareholders. Singapore Airlines, Etihad and two major Chinese investors who between them own about eighty per cent of Virgin. If they are not prepared to step up, then the next step, the next appropriate step, is to test the market to see whether there is any other private sector investor who is interested, prepared to buy the business, help recapitalise and restructure the business, help refocus the business on its well performing parts. With Virgin, yes, they have faced some challenges. They have accumulated high levels of debt, but their domestic business and their frequent flyer business were fundamentally performing well. It was other parts of their broader business operations that were, on the face of it, dragging things down. These are things that will now be able to be worked through.
REBECCA LIVINGSTON: Minister, Richard Branson the Virgin group boss has said that in most countries federal governments have stepped in in these unprecedented crisis for aviation to help their airlines. Sadly that has not happened in Australia. Have you let travellers down?
MATHIAS CORMANN: I completely disagree with this. We have provided very substantial support to the aviation sector, as we have provided very substantial support to businesses all around Australia. $130 billion worth of wage subsidies to businesses around Australia, including Virgin and Qantas and other businesses in the airline industry. That is a massive level of taxpayer support for a private sector business to help them through this period. But in terms of going beyond this, in the end, it is up to the owners of the business to take the initiative to save the business. If they are not prepared to do it, it is absolutely appropriate and important that the market is tested to see what other private sector interest there might be. If the Government steps in at this point we might actually make it harder for there to be a viable, profitable strong airline on the other side.
REBECCA LIVINGSTON: The Finance Minister Mathias Cormann responding to confirmation this morning that the airline Virgin Australia has formally entered into voluntary administration. So that affects about ten thousand people directly employed by the airline. A further six thousand indirectly. Virgin at pains to say that they hope the administrators recapitalise the business and ensure it emerges in a stronger financial position on the other side of COVID-19. Mathias Cormann, what if the private sector doesn’t come forward and we are left with one carrier. How does that serve our national interest if Qantas has a monopoly in the market?
MATHIAS CORMANN: We do not believe at this point that this is where we will end up. We are quietly hopeful that this process will lead to a successful conclusion. We … interrupted
REBECCA LIVINGSTON: Why are you hopeful? Are you speaking to people who are showing interest?
MATHIAS CORMANN: We believe that there will be a level of private sector interest. Now that the business is in administration, some of the challenges in terms of a restructure given the level of debt and the existing shareholders that have been involved, some of those issues will be able to resolve themselves in a more straight forward fashion. You have to remember, if the Government had put in $1.4 billion worth of money in the form of a loan while all of the existing debt remained on the books, and all of the existing shareholders remained on the books, we would have put taxpayers money at substantial risk through this process. We would still not have had any guarantee of a viable airline on the other side. Whereas what will now happen is that the administrator will lead a process, engaging with creditors, to assess how the business might be able to be sold to a new owner or how perhaps with new shareholders the business can be recapitalised, restructured, refocused on its successful well performing parts. That really is the best possible opportunity to have a continuing two airline situation in Australia moving forward.
REBECCA LIVINGSTON: Just finally Minister, if your optimism doesn’t come to fruition, would the Federal Government consider stepping in at a later date?
MATHIAS CORMANN: That is just totally premature to speculate on these sorts of things. At this stage there is a process that is about to start. Over the next few days and weeks we will engage in that process. I am certain that there will be a level of private sector interest coming forward. We will see where that leads us. We will make the appropriate judgements along the way.
REBECCA LIVINGSTON: Appreciate your time this morning Minister. Thanks so much.
MATHIAS CORMANN: Always good to talk to you.