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Qantas dispensable: Virgin CEO

Qantas Airways is no longer indispensable to Australia because of the growth of its second largest carrier Virgin Australia Holdings, Virgin’s chief executive officer John Borghetti said.

“The days when Australia was so reliant on one carrier because it was so much bigger than anybody else are well and truly gone,” Borghetti said in an interview. “That’s history.”

Qantas provides an “essential service” that entitles it to government support in its battle with Virgin, the country’s Treasurer Joe Hockey told reporters on February 14.

The two carriers, locked in a market-share battle that drove them into a combined A$319 million ($286 million) of losses in the six months ended December, are both lobbying Australia’s government as it weighs support for Qantas, which argues Virgin is funded by foreign airlines seeking to weaken the larger carrier. Virgin’s first-half revenue rose 6.4 per cent to A$2.24 billion, the company said on Friday, while Qantas on February 27 reported a 4.1 per cent drop.

“This is an important crossroads in our industry’s history,” Borghetti said in a speech. “Those airlines that do the best by their customers and manage their businesses effectively will prosper, and those that do not will fail.”

Borghetti is trying to break Qantas’s dominance in Australia by adding flights, business-class seats and lounges to win more corporate accounts, a segment where it had a near-monopoly for a decade up to 2011. “Aggressive pricing” as seat capacity grows in excess of consumer demand has driven the market into a loss before interest and tax for the first time since 1992, according to a Virgin presentation.