The future of embattled airline Virgin Australia Holdings Limited (ASX: VAH) is looking a little brighter this morning after the Queensland government threw it a lifeline.
What has happened?
Late on Wednesday Queensland Treasurer Cameron Dick revealed that the state-owned Queensland Investment Corporation (QIC) will make an official bid for a stake in the airline.
Virgin Australia is currently in voluntary administration after failing to find the funding required to see it through the coronavirus travel restrictions.
The survival of Virgin Australia is very important for the Queensland government given how many jobs the company provides in the state. Virgin Australia’s headquarters are based in Brisbane.
In addition to this, the airline brings a lot of traffic into Brisbane Airport, which QIC owns a stake in.
Treasurer Dick commented: “We have an opportunity to retain not only head office and crew staff in Queensland, but also to grow jobs in the repairs, maintenance and overhaul sector and support both direct and indirect jobs in our tourism sector.”
He also believes that saving Virgin Australia is imperative, as Australia needs another sustainable, national airline to compete with Qantas Airways Limited (ASX: QAN).
A “laughable” move.
Not everyone believes that this is a good move by the Queensland government.
Last night Home Affairs minister, Peter Dutton, criticised the plan.
He tweeted: “Premier Palaszczuk has almost bankrupted Queensland, and now in the middle of a crisis they want to buy an airline. It is laughable. She “leads” a government which is corrupt and chaotic.”
What now?
Administrators are understood to be looking to conclude the sale process by next month.
But just because the QIC is bidding for a stake, doesn’t necessarily mean it will succeed. There are a number of rumoured suitors looking over Virgin Australia.
However, Mr Dick appears optimistic. He said: “This is a competitive space, but Queensland is a serious contender and our discussions with the administrators have been making progress. Queensland is Australia’s home of aviation and with all our competitive advantages, we fully intend to stay that way.”
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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