ETIHAD Airways chief executive James Hogan has blasted Qantas for being un-Australian in its campaign to undermine his airline’s investment in Virgin Australia and has pledged that the Abu Dhabi-based carrier will never seek to control Virgin.
Melbourne-born Mr Hogan said Qantas’s hostile reaction to Etihad’s bid to increase its shareholding in Virgin to 10 per cent was a ploy to distract from Qantas’s own failings.
Etihad yesterday won approval from the Foreign Investment Review Board to lift its stake in Virgin from 5 per cent to 10 per cent. It is understood it was given the green light because 10 per cent was not close to a controlling interest and was lower than the shareholdings of existing foreign shareholders Virgin Group, which has 26 per cent, and Air New Zealand, with 19.9 per cent.
Qantas, which refused to comment last night, has privately warned the Gillard government that its existence will be threatened by Etihad’s investment in Virgin, because the airline is owned by the government of the oil-rich United Arab Emirates and could bankroll a major attack on Qantas’s domestic markets via Virgin. In a backroom lobbying campaign against the Virgin investment, Qantas has portrayed Etihad as a plaything for oil-rich sheiks, saying in a leaked briefing paper that “Virgin/Etihad will be able to flood the market with capacity until its competition is forced to significantly reduce its own operations or worse”.
Mr Hogan declined to label Qantas’s campaign against his airline as xenophobic, but said Qantas’s behaviour was unworthy of the national carrier and out of step with mainstream Australia.
“As a very proud Australian, I know that this is not representative of the market or the country or the people,” Mr Hogan told The Australian in an exclusive interview in Etihad’s headquarters in Abu Dhabi.
“It is a great shame the business (Qantas) has used this as a tactic. The UAE has a great relationship with Australia in trade, defence and in a whole range of areas.
“In other markets, we have not seen these sorts of reactions from national carriers. To see it being used to mask their own real issues is disappointing.”
Qantas’s troubled international operations lost $450 million before interest and tax last financial year.
Mr Hogan said Etihad’s investment in Virgin was aimed at improving co-operation on routes, networks and to create better economies of scale. It was similar to what Etihad was doing with other airlines such as Air Berlin and Ireland’s Aer Lingus.
He described as ridiculous any claim that the investment would eventually become a backdoor route to controlling Virgin and taking on Qantas.
Mr Hogan left open the possibility that Etihad might eventually seek to lift its investment in Virgin to as high at 19 per cent but he promised it would never seek to control the airline. He said that when the carrier reached 10 per cent ownership of Virgin, he would review whether to go higher.
“What we won’t do is get into a position where it means we take control of the business,” he said.
“We can’t run an Australian airline from Abu Dhabi, nor do we intend to.”
In February, Virgin announced a restructure that allows its domestic business to be majority foreign-owned, opening the way for Etihad’s investment.
Qantas, Virgin’s main competitor, says the decision creates an uneven playing field because Qantas is subject to the Qantas Sales Act that restricts foreign ownership in the flag carrier to 49 per cent.
Etihad says its 10 per cent investment in Virgin Australia is an extension of its marketing alliance with the Australian carrier, which has already produced benefits for both airlines. The alliance includes code-sharing on flights, joint marketing initiatives and reciprocal earn-and-burn on their respective frequent-flier programs.
“It is expected that the equity stake in Virgin Australia will lead to revenue-generating opportunities,” Etihad said in a statement yesterday.
The airlines, between them, operate 24 flights a week to Australia and Mr Hogan has said he wants to build on Etihad’s presence in the market in conjunction with Virgin, with Perth flagged as a likely new destination.
He has not yet sought any board representation and the airline is expected to continue to buy shares on the market over a period of time.
Etihad was created by the UAE in 2003 and, along with its fellow Gulf carriers Emirates and Qatar Airways, has made major inroads into the Australian aviation market following the withdrawal of European carriers over the past decade.
The airline posted its first profit last year after seven years of losses.
Virgin, which had been expecting the widely flagged increase in Etihad’s stake, last night declined to comment.
The airline’s shares closed up 1c yesterday at 39c.