Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Friday, 26 June 2020
PETER STEFANOVIC: In breaking news, private equity fund Bain Capital looks set to become the new owner of Virgin Australia after New York hedge fund Cyrus Capital Partners withdrew its offer. In a statement Cyrus complained Deloitte’s administrator had failed to return calls or emails. It paves the way for Bain to be named preferred bidder. Well joining me live now is Finance Minister Mathias Cormann. Minister good morning to you. Thanks so much for joining us.
MATHIAS CORMANN: Good morning.
PETER STEFANOVIC: What is your reaction to that news this morning?
MATHIAS CORMANN: This process has been playing out for some time. The administrator has been working his way through a process and no doubt will be making relevant announcements when he is in a position to do so.
PETER STEFANOVIC: So is Bain Capital now the new owner of Virgin airlines?
MATHIAS CORMANN: That is not a matter for me to pronounce. It is now going to be a matter for the administrator to advise what position he has come to as a result of the process that he has been following.
PETER STEFANOVIC: What about that claim from Cyrus this morning saying that they didn’t get any returned emails or phone calls. Was Deloitte the right person to go through then? The right company I would say.
MATHIAS CORMANN: Again, the administrator had the confidence of creditors to go through the process that he has gone through. He started with a relatively long list of potential bidders. That was whittled down through a process. This is the way these processes work. In the end the administrator had to come to one final bidder with whom to negotiate. No doubt he will explain what he has done and why he has come to the conclusions he has when he is in a position to do so.
PETER STEFANOVIC: Well Bain says it will honour the $450 million of entitlements that are owed to workers. Do you have any doubt that they will do that?
MATHIAS CORMANN: You have to take those sorts of statements at face value. They are a very substantial business. They have significant capital depth. I have to take their word for it.
PETER STEFANOVIC: Do you think that it is quite possible that Cyrus might have been spooked by the Qantas news yesterday?
MATHIAS CORMANN: I do not think that it is any surprise to anyone that the outlook for the aviation sector is going to be challenged for some time. That is not news that has only just emerged. It is very clear that the level of activity, in particular in terms of international aviation, but also domestically, will be significantly lower than what it has been prior to this crisis. Qantas has made a decision to adjust its size in the context of what it expects the likely activity and demand for its services to be over the next little while. That is what businesses have to do. Airline businesses clearly are on the front line when it comes to the impact of the coronavirus crisis. That is the same for Qantas as it is for Virgin. I cannot imagine that Cyrus would have been taken by surprise by that.
PETER STEFANOVIC: We can be or try to be as positive as we can be about the economy, but yesterday’s news was a fair dose of reality wasn’t it?
MATHIAS CORMANN: It is very sad news. But it is also the reality that we are looking at. Some parts of the economy have been particularly heavily hit. Aviation arguably has been one of the worst hit sectors of the economy. We do have to face the facts. We do have to face the facts that over the foreseeable future the level of activity in that sector is going to be significantly less than what it was prior to the coronavirus crisis hitting us.
PETER STEFANOVIC: Are you even sure that who ever, if it is Bain that takes Virgin Australia now, are you even sure that six months down the track it will still be flying?
MATHIAS CORMANN: The bidders that put themselves forward or that expressed an interest and are now pursuing the opportunity to buy the Virgin business would have done all of the necessary due diligence. No doubt they would have developed a business plan to ensure that they have a model that is viable and sustainable in the context of this crisis. Everybody knows what the environment is going to be over the next little while. In the end investors have to make judgements on what they believe is going to be realistically workable. I can only assume that is what Bain has done. That is why they put forward their bid.
PETER STEFANOVIC: Alan Joyce says that more help is needed, more financial help from the Government is needed. Will he get it?
MATHIAS CORMANN: We have the JobKeeper program running, which is providing substantial support. That is going to the end of September. For the aviation sector generally we have provided significant additional fiscal support and put fee relief in place. That has recently been extended. We are currently considering very carefully how we most appropriately transition out of the temporary levels of support that has been provided across businesses across the economy. But we are very conscious of the fact that businesses like in the aviation sector are particularly hard hit. That we need to be very careful in how we calibrate the phasing out of the temporary levels of support. We are currently making judgements. As soon as we are in a position to make relevant announcements, we will make them.
PETER STEFANOVIC: So JobKeeper extension is that a live option?
MATHIAS CORMANN: We are currently considering very carefully how we most appropriately transition out of the temporary levels of support that have been provided across businesses across the economy. We are very conscious of the fact that businesses in the aviation sector are particularly hard hit and that we need to be very careful how we calibrate the phasing out of the temporary levels of support. We are currently making judgements and as soon as we are in a position to make relevant announcements, we will make them.
PETER STEFANOVIC: So JobKeeper extension, is that a live option?
MATHIAS CORMANN: We are considering how we can most appropriately and most responsibly phase out the temporary support. The ultimate objective has to be that individual businesses pay for the wages of their employees out of their income rather than on the basis of taxpayer support. But we do recognise that some parts of the economy are particularly heavily hit. We need to take that into account as we make judgements on how to phase out the crisis level of temporary support.
PETER STEFANOVIC: Okay. When you say phase out, what does that mean? What kind of length of time might that well be? If it ends in September, could that phase out be a few months so it could last into next year?
MATHIAS CORMANN: You are asking me to make announcements in relation to things which we are still carefully considering how best to proceed.
PETER STEFANOVIC: If not JobKeeper, what kind of alternative is being looked at?
MATHIAS CORMANN: Again, as I put to you, we have a JobKeeper program which is providing unprecedented crisis level temporary fiscal support. That is coming to an end at the end of September, based on the current settings. Clearly there is a conversation taking place now how we can most appropriately transition from that crisis level support back into business as usual and over what time period. When we have made relevant decisions in relation to that, we will be making those announcements forthwith.
PETER STEFANOVIC: Were you surprised that Alan Joyce didn’t take the option to continue with JobKeeper for those 6,000 staff members who could have taken that until September, but he decided against it?
MATHIAS CORMANN: Alan Joyce and the leadership at Qantas are making judgements about the outlook for their business. They are guided by keeping a viable business going in the context of significantly lower demand and activity for their services. It is a business decision. They have to make judgements on how to keep the business viable for all of the many thousands and thousands of employees that continue to work there.
PETER STEFANOVIC: He mentioned that international travel won’t resume until July next year. Is that your expectation?
MATHIAS CORMANN: That is what it looks like. It is certainly hard to see it resuming in the same way as it has been taking place before for a very long time. Even when it does resume, I suspect that it will resume at a much lower, more subdued level than before.
PETER STEFANOVIC: Just a couple of quick ones before you go, Minister. First of all, Daniel Andrews, he has asked for this Defence Force personnel and then he’s kind of back flipped on that. Do you have any idea why he would have done that and what do you think about it?
MATHIAS CORMANN: We continue to work with all State Governments and in particular in the current context with the State Government in Victoria. Everybody is trying their best to stay on top of this, get on top of this, stay on top of this. I am not going to be critical here. These are evolving situations. Defence is providing assistance when it comes to testing activities and the like. We will continue to engage constructively. We are all in this together. We want to get on top of this. It is not a matter of having shots at each other.
PETER STEFANOVIC: But the ADF is there. Why not use it?
MATHIAS CORMANN: They are using the ADF. They are using the ADF as I understand it to assist with… interrupted
PETER STEFANOVIC: Very scaled down though.
MATHIAS CORMANN: Again, these are judgements that are most appropriately made on the ground. We are ready to assist if and as required. We will continue to engage with the State, respecting the fact that the State Government has the lead in their jurisdiction when it comes to making many of these judgements.
PETER STEFANOVIC: Okay. Minister, we’ll end on a positive note here. Australia and New Zealand being awarded the World Cup in 2023 for the Women’s World Cup. It’s going to be pretty decent for the economy I would have thought.
MATHIAS CORMANN: It is awesome news. It is very exciting. It is a fantastic boost. Congratulations to all involved. About a half a billion dollars injected in the economy on the back of it is what we believe will happen. Beyond that, even beyond the economic boost, it is just such an exciting prospect to have a world-class event like that coming to Australia and New Zealand. Congratulations to all.
PETER STEFANOVIC: Okay, everyone agrees with you there I’m sure. Finance Minister Mathias Cormann, appreciate your time this morning. Thanks for joining us.
MATHIAS CORMANN: Always good to talk to you.