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Comment by ferros | Hacker News Reader

Virgin’s unrealised value is in the government handouts and concession that are still to come.

Virgin is the second and only competitor to Australia’s main carrier QANTAS, and sole carrier for some routes.

The government will not let them fade away. Big money and concessions will be forthcoming.

Why will Virgin be treated differently than Ansett? (I was pretty young when Ansett went bankrupt, but Virgin's reputation seems to have been "trying to be Ansett and make a duopoly again".)

When Ansett went broke Virgin had just entered the market (further undercutting prices), so there was competition to Qantas. Now what else is there?

There was a rumour that the AU government was willing to let VA collapse and hope that a foreign low-cost airline like Ryanair or Easyjet would enter the market. But it's unlikely any airline is in a strong enough position to make that kind of move at the moment. So they will likely offer a restructured VA the same kind of support as they'll offer Qantas.

Rex has been talking about buying some bigger jets to try and grab market share while Virgin and Qantas are struggling.

Virgin won't get special treatment, but the Australian government, like all governments, will give the whole commercial aviation industry concessions and benefits to help keep it afloat, as it is of importance for economic and security reasons.

It's a different scenario to when Ansett went under, as back then the problem was isolated to Ansett, and the industry was still fundamentally strong (due in part to the entrance of Virgin, which at that stage was an up-and-coming low-cost carrier with solid backing from Branson and other early investors).

The AU government wasn't willing to bail VA out of insolvency, but now that a private buyer has come in to restructure it, it will be able to get the same benefits as Qantas.

Unlikely I’d say. The govt has not been forthcoming so far, and the company is mostly foreign owned anyway right?

I think they have avoided any handouts to accelerate(Or at least not delay) a sale. Now that there is new ownership I expect they will come to the table.

Not to pass judgement on the wisdom of this strategy either way, but this decade's Liberal government hasn't been particularly open to saving/subsidising foreign owned businesses just because they maintain a national industry. Otherwise GM and Ford would still have factories here.

Correct, until a couple of years ago, VA was pretty much owner by Air New Zealand, Singapore Airlines and Etihad each having about 22%. Richard Branson's Virgin Group had less than 10% and the rest was publicly held by mostly retail investors. Then Air NZ sold their shares to a Chinese consortium.

Why would a country need two domestic airlines? To keep one alive makes sense as a strategic asset. But two? Can just make the market more friendly to foreign airlines if more competition is needed/wanted.

Foreign competition is a problem because employees of the domestic company vote (the foreign company doesn't have a large back office of voters). Thus the domestic company can vote for things good for them bad for competition and bad for the country. Two companies means that the thing voted for is more likely to be fair because a number of good for one ideas are not possible with the other opposing it.

Note that many of the things good for the domestic company are bad for the country overall. However non employees are not individually harmed as much as employees are individually helped. Thus most voters won't oppose the bad regulations.

Has Australia not given any bailouts to the airlines yet?

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