- Qatar Airways is buying a 25% stake in Virgin Australia.
- Velocity members will be thrilled; Qantas frequent flyers may not.
- The move could see Virgin take up widebody jets once again, posing big long-haul competition for Qantas.
Qatar Airways will buy a 25% stake in Virgin Australia in a massive shakeup of Australia’s aviation market that will offer huge benefits to Australian travellers.
After saying reports of the deal were “rumour and innuendo” earlier this month, Virgin Australia CEO Jayne Hrdlicka confirmed the impending buy on Tuesday, October 1. She said it would provide passengers with increased earn and redemption opportunities, expand codeshare arrangements, and improve schedule and connectivity options.
Virgin Australia also intends to start wet-leasing Qatar Airways aircraft from mid-2025, starting flights from Sydney, Melbourne, Perth, and Brisbane to Doha. Wet leasing refers to arrangements whereby an airline rents a crewed and maintained aircraft but operates it as its own – like what Qantas does with the Alliance Embraers and the Finnair A330s.
The outcome for passengers is that there will be more Qatar Airways metal at Australian airports and more flights – likely in time for the next European summer.
“These extra flights will open up more than 100 new connecting itineraries across Europe, the Middle East, and Africa for Australian travellers,” a statement from Virgin Australia reads…
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“The expanded codeshare and collaboration arrangement will provide greater access to a greater range of international destinations with improved schedules and frequencies, increased earn and redemption opportunities for members of Velocity and Qatar Airways’ Privilege Club, and broader access to great value fares for leisure travellers, small and medium sized enterprises, and corporate customers.”
Winners and Losers
Virgin Australia’s Velocity members will be big winners here. They already enjoy perks when flying Qatar Airways, including lounge access at all Qatar ports for gold and platinum members. More flights mean more seats available for redemptions and the deepened relationship will likely push Velocity members further up the priority tree when it comes to redemption releases.
Of course, Qatar Airways Privilege Club members will also get a bounce, with Virgin Australia making their flying in this part of the world as comfortable as it can possibly be on a Boeing 737 with no lie-flat seats.
Beyond passenger benefits, the deal puts some more ballast in Virgin Australia’s already solid balance sheet and helps secure the airline’s long-term future. With two high-profile Australian airlines going bust this year, this kind of stability offers passengers reassurance that when they book tickets, the carrier will be around to operate the flight.
The biggest losers will likely be Qantas frequent flyers, who already get a raw deal from Qatar Airways. This is despite Qantas and Qatar both being Oneworld members. In theory, Qantas frequent flyers should have an easier time of it when redeeming seats and flying on Qatar than Velocity members, but they don’t. One outlet cheerfully called Qatar’s move a “nightmare” for Qantas.
That’s probably overegging the situation but there will be more competition on long-haul routes into Europe and a more financially robust competitor in Virgin Australia. It’s good for the wider travelling public but not so crash-hot for Qantas.
A Neat Solution to a ‘No’ from Government
Virgin Australia needs permission from the ACCC to ramp up its codesharing and fare coordination with Qatar Airways. But the hot tip is the ACCC won’t stand in the way. Qatar Airways also needs approval from the Foreign Investment Review Board. However, DMARGE understands talks between the parties have been underway for some time. As part of the existing bilateral air services agreement, Australian carriers can fly to Doha. As yet, none do, and VA is unlikely to encounter any regulatory turbulence on that front.
Most readers will be aware there’s some history at play here. Qatar Airways tried to boost its Australian flights last year beyond the combined 28 weekly flights it is allowed to operate into the busiest airports – Sydney, Melbourne, Brisbane, and Perth. The Australian government, after some lobbying by Qantas and other interest groups, said no.
That caused a backlash because the extra capacity was badly needed. Air fares were high, and availability was low. Passengers were getting squeezed. A conga line of influential travel insiders lined up to burn the Australian government, who seemed to think their decision would slide through unnoticed.
The same government and its agencies are unlikely to make the same mistake, especially when the outcome is more competition and clear benefits for pretty much everyone except Qantas status pax. Today’s announcement see’s Qatar get what it wants – more flights, even if they are sold as Virgin Australia flights. It’s a tidy solution.
Virgin Australia’s Widebody Future?
Hrdlicka says she will take a “measured approach” to VA’s return to long-haul flying. “Toe in the water,” she calls it. However, the CEO also gives the mid-2025 target date. Hrdlicka says if the wet leases go well, Virgin Australia will look at the “longer-term merits and viability” of widebody aircraft flying.
Aside from the immediate sugar hit for Virgin Australia loyalists, the interesting longer-term question revolves around Virgin Australia’s future widebody ambitions. A decade ago, VA’s business class product on their A330s and B777s was industry-leading and is still missed by many people. More recently, the airline has scotched talk of a return to widebodies. Now, they’ve changed course again. Without widebodies, Virgin’s scope for international flying beyond the immediate neighbourhood is limited.
In five or ten years’ time, having a half decent long-haul local competitor to Qantas would be a very good thing. Today’s announcement could be the first step on that path.