22 April 2020

Virgin collapse could further hurt ACT's economic recovery prospects

| Dominic Giannini
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Virgin Australia

Virgin Australia has entered voluntary administration which could have serious ramifications for Australia’s domestic aviation industry. Photo: File.

The possible departure of Virgin Australia from Australia’s aviation market would be a blow to the ACT’s tourism sector and the recovery pathway to a post-pandemic economy, according to Chief Minister Andrew Barr.

Mr Barr said the loss of Virgin and its low-cost subsidiary Tiger Air would damage Canberra’s viability as an affordable travel destination from major state hubs.

Tiger Air is the only low-budget airline servicing Canberra, and without it and Virgin offering competition to Qantas, the ACT would lose access to large chunks of Australia’s lucrative tourism market unless another carrier picked up the dropped services, he said.

The ACT’s tourism market brings in more than $2.5 billion a year from more than six million tourists.

Domestic tourists in the ACT make up 90 per cent of travellers coming to the territory, and Virgin and Tiger shared 42 per cent of the market in Canberra before the COVID-19 pandemic was declared.

“A second viable airline in Australia is fundamental to the ongoing strength of both the ACT’s tourism industry and tourism in Australia,” Mr Barr said.

“The Canberra-Melbourne and Canberra-Brisbane routes were among Tiger Air’s most successful routes and a very significant part of driving domestic tourism for us.

“[Virgin] had very extensive coverage and they were an airline we were talking to about Trans-Tasman services.”

While international travel has been called off for the foreseeable future, Mr Barr said the ACT would be in a better position if the spread of COVID-19 continues to be contained and National Cabinet moves to open the country up to domestic travellers.

If the same number of internationally bound Australians travelled domestically instead, travel demand in the territory would increase five to 10 times and it will be the domestic travellers the ACT will look towards to help our economic recovery when lockdown restrictions are eased, Mr Barr said.

“Two viable domestic airlines would be critical for domestic tourism in Australia as for the next little period it is only going to be domestic tourism,” he said.

Although the ACT Government is not in any position to bail out the airline, Mr Barr said there were promising signs that the airline would get assistance. The NSW and Queensland governments both put forward packages contingent on the company having its headquarters in their states’ capital city.

“Unfortunately, it is just a little bit beyond the balance sheet of the second smallest government in Australia to be able to bail out Virgin,” he said.

“I was interested in what was essentially the State of Origin feud we have not been able to have this year between NSW and Queensland who went to war, metaphorically, over Virgin.

“It was great to see the passion between those two states for the airline’s future, so there is optimism in that regard and one would hope out of this process there is a possible restructure that would see a viable second airline.”

The Federal Government has ruled out a bailout, preferring a market-led solution. Up to 10 suitors are circling the company, including some already on its share register.

While travel is still off the cards unless it is absolutely essential, you can still help local businesses from home. Check out our guide about how you can help here.

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Capital Retro6:06 pm 23 Apr 20

“The ACT government should invest in starting up a small airline company based in Canberra,

Hey, great idea and a good name for it would be “Rhodium Airline Solutions”.

HiddenDragon9:15 pm 22 Apr 20

“Domestic tourists in the ACT make up 90 per cent of travellers coming to the territory..”

If some of the marketing is anything to go by, a reasonable chunk of the remaining 10 per cent made up by international tourists has, at least in part, been real estate tourism – the loss of that business will have an economic impact well out of proportion to the lost tourist numbers.

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