Virgin is under foreign control and its debts are crushing workers

Written by: John G on 7th May

Virgin Australia workers are under tremendous stress, grounded, waiting for welfare or facing more layoffs.
They want government intervention to rescue them and provide air services vital to the country’s people and economy.

A bunch of foreign governments, as representatives of foreign capitalists, are toying with their future. How did it get to this?

The beginnings…
Virgin came into the Australian market as a discount operator undercutting the duopoly of Ansett Airlines and Qantas.  

Qantas, then a government international airline, took over the government domestic airline Trans Australian Airlines (TAA) when it was sold by the Keating Government in 1992. This came after the Hawke Government used scabs to crush 1989 pilots’ strike. 

The Labor Government abandoned the two airlines policy and opened the skies to foreign players. In 1993 the Keating administration privatised Qantas with a 25 per cent share sale to British Airways, followed from 1995 by a two-year public stock exchange float.

Virgin commenced operations just before the Dot Com crisis and the 2001 attack on New York’s World Trade Centre. Air travel across the globe was disrupted, and Ansett Airlines collapsed, after 65 years. This opened the door for Virgin to rapidly expand its routes from two to 42 as Qantas’s sole competitor. 

Virgin struggled to raise sufficient capital to compete. 

During the 2011 European stock exchange crash, Air New Zealand gained 15 per cent of Virgin. New management, previously senior Qantas executives, took over. Focus shifted from the discount market to a business focus. New wide-bodied aircraft ramped up competition with Qantas. 

But Qantas was also in trouble, sacking thousands of staff and reducing its fleet.  

Virgin has made a profit only twice in the last decade despite a five-year travel boom. That boom started to plateau during 2019 with growth noticeably slowing for both Virgin and Qantas. 

Virgin hasn’t been alone with difficulties raising capital. In the 2008/9 Global Financial Crisis, Qantas cancelled an order for 15 Boeing Dreamliner aircraft, then canned another 35 in 2012, $11bn worth in all. In 2018 Qantas reduced an A380 aircraft order from 20 to eight, a reduction worth $5.7bn. In February this year, Qantas cancelled the remaining A-380s on that 2006 order. They feared hitting overcapacity, with monster aircraft not suited to a long slowdown.

Credit issues as the Covid Crisis hit saw Virgin agitating for a $1.4 billion loan to tide it over. It had little success with the government, bankers or its shareholders. Its current credit rating is in the cellar. 

Busts see foreign vultures feeding on the stricken
Previously, Virgin used share placements to overcome credit problems, with founder Richard Branson’s holding reduced to 10 percent, and 20 per cent owned by each of Etihad Airlines, Singapore Airlines, Hainan Airlines Holdings and Nanshan Capital, owner of Qingdao Airlines. Even with the run of book losses, foreign airlines and tourist operators have invested in Virgin since 2011. 

The foreign shareholders, apart from Branson, and to an extent Nanshan Capital, are government owned. The governments represent collectives of capitalists, aggregated capitals, joined together to exploit Virgin’s workforce and facilitate their own airlines’ operations and profit making.  

Virgin isn’t alone in having foreign shareholders. 

Qantas’s largest shareholders are foreign bank nominee companies. Nominees hold shares in name only on behalf of an undisclosed person, the beneficiary, who effectively owns and controls the shares. 

According to its 2019 Annual Report, the biggest single shareholder in Qantas is HSBC Custody Nominees (Australia) Limited with 40.42 percent of all Qantas shares. This gives it control. Some other HSBC nominee companies have another 3.18 per cent. Nominees of American banks JP Morgan with 17.6 per cent and Citicorp with 10.37 per cent, along with British-American HSBC dominate the ownership. A number of other foreign bank nominee companies are also on the books including Bank National de Paris and Credit Suisse 

Legally 49 per cent of Qantas must be Australian owned, but because nominee companies disguise the real investors, it’s impossible to police.

Virgin’s foreign shareholders have used the company to consolidate their access to Australian domestic seats and to feed into their overseas operations. It allows them to minimise tax by transferring profit from Australian international and domestic packages to their foreign entities. They have shadowed Qantas in their major route schedules and cover lesser routes, even when there is no advantage to Virgin itself. 

Under their ownership Virgin’s debt burden inexorably climbed. They grind the workforce under the weight of a failing strategy.

Resistance and momentum to nationalisation 

Virgin workers have spoken out powerfully and directly to the people, with their union’s leadership. They appeal for the government to step up and take over their fate and the fate of Virgin. Many Australians are in the same airship, facing precarious futures and unemployment. 

The sympathy for workers’ battles, to save their futures and services for the country, is dangerous to the ruling class. But there’s a cost to those who stand up.

Employers here have a 150-year history of black banning “troublemakers”. 

Labor leaders baulk at embracing airline nationalisation. Albanese dithers, calling for government investment to prop up capitalist ownership. Passive government shareholdings show some recognition of where the industry is headed. But it fails to grab the future and put the chaos of capitalist competition behind the workforce and the country by nationalising Virgin. 

Parliamentary leaders try to get into the struggle’s slipstream. Putting themselves at the centre shifts the tussle into a parliamentary swamp of inertia, narrowness and legal constraints.  

Compromised parliamentary intervention is a complete waste of time. 

The chaos of Virgin Australia cries out for industry to be organised and planned as a whole, to bring to an end the cycle of boom and bust and large-scale unemployment inherent in capitalist competition. Only in nationalisation can the workforce find some relief. 

They would be under the ownership of government representing capitalists a whole, but would still be selling their labour power and having the services run within the capitalist system.  Workers in public hospitals, the NBN, Australia Post and schools know these limitations only too well. Governments squeeze their workforce, run-down assets and withhold funds. 

A huge number of foreign airlines are now government owned like Singapore. Emirates, Etihad. Workers know they are not socialist enterprises, but a stage of capitalist enterprise. New struggles, not too different to the old ones, will quickly emerge.

Government and Labor leaders fear nationalisation will expose the irrelevance of individual capitalists to modern society. Planning and organisation of industry requires that capitalists be pushed aside. They are a handicap impeding industry, commerce and prosperity. 

It’s not the workers who are redundant, it’s the capitalists, not just in Virgin but much more widely.

The momentum towards nationalisation and the redundancy of capitalist ownership is growing. The need for airlines to provide transport services for the community and the country is critical for our future. 

Pressure is building towards an end to foreign exploitation of workers, manipulation of the airlines’ strategy and towards independence.