Qantas opposes Virgin Australia’s international unit plan

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Qantas Airways has protested Virgin Australia Holdings' (VAH) proposal to form Virgin Australia International Holdings (VAIH), an unlisted entity that would hold Virgin's Indonesian traffic rights.

In a letter to Australia's International Air Services Commission (IASC), Qantas general counsel Brett Johnson warned that the implementation of VAH's proposal could see foreign parties one day having "effective control" of VAIH.

"The Virgin proposal is designed to permit the foreign shareholding in VAH to exceed the 49% limitation imposed on Australian International Airlines," writes Johnson.

"Once the proposed structure is implemented there is nothing to prevent VAH from becoming wholly owned by foreign shareholders. Subject to Foreign Investment Review Board (FIRB) approval, there is also nothing preventing VAH from being acquired by one foreign shareholder," he adds.

The Qantas letter follows a submission to the IASC by VAH in late February. The submission requests that Virgin Australia Airlines' Indonesia routes be transferred to VAIH from Virgin Australia Airways, which would cease to be an international carrier. VAH said the move would ensure compliance with the Air Navigation Act of 1920, which limits foreign ownership of Australian international airlines to 49%.

"Should VAH be substantially (or wholly) acquired by one foreign shareholder, that shareholder has control of the composition of the VAH Board and, therefore, itself has effective control of both VAH and VAIH," writes Johnson.

"The implementation of the proposed restructure will create a real risk of VAIH and its subsidiaries not being entitled to be designated as Australian carriers and to continue with their current operating authorisations," he says.

Qantas called for the IASC to make a comprehensive review to ensure that in future VAIH should comply with "the requirements to be designated as an Australian carrier under the relevant air service agreements".