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Virgin Australia has issued a sharply worded statement disputing Qantas’s assertions that it benefits from having foreign government owned airlines as its major shareholders.
“The proposition that Virgin Australia has access to cheaper capital by virtue of our shareholder base is completely false,” the statement reads, before noting that Air New Zealand and Singapore Airlines are both publicly listed companies “that are expected to make a profit and a return on their investments”.
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It also gave Qantas a not so subtlely worded reminder that the current capital raising Virgin has underway “is a standard way that publicly listed companies raise funds”, an evident reference to reports Qantas is seeking federal government backing for its debt, or even a federal government shareholding in the once government owned airline.
“As a listed company, Qantas also has the ability to undertake capital raising activities. Qantas has regularly raised equity capital from global investment markets – in fact it has done so nine times over the past decade, generating funds of over $1.2 billion. Large globally-focussed institutional investors represent over half Qantas’ share register, which have tens of trillions of dollars available to invest in debt and equity markets.”
Of Virgin’s three major airline shareholders, Air New Zealand is 53 per cent owned by the New Zealand government with the balance of its shares traded on the NZ and Australia stock exchanges, while Singapore Airlines is 55 per cent owned by Temasek, the Singapore government’s investment company. Eithad is fully owned by the government of the UAE.
travelhound
says:I refer to the statements made by Warren Truss outlining the government’s view on the QANTAS /Virgin Australia dispute and make particular reference to his comment “clearly the Government is not going to retrospectively change laws to disadvantage Virgin Australia”.
My understanding is, the laws Warren Truss refers to relate to the Air Navigation Act with particular reference to Section 11A Foreign Shareholdings in Australian International Airlines.
This provision of the act (1) limits foreign shareholdings in “Australian international airline” to a maximum 49% shareholding. The act places responsibilities on the (2) directors of the Australian International airline to enforce the restrictions of foreign ownership on an “Australian international airline” and gives power for the (3) minister (government) to be given access to information “…concerning the extent (if any) to which foreign persons have relevant interests in shares in the Australian international airline….”.
On the 23rd February 2012 Virgin Australia Holdings Limited announced a “proposed new structure for VAH’s international airline operations”.
In VAH’s statement to the Australian Stock Exchange it made clear reference to the “49% foreign ownership restrictions under the Air Navigation Act (ANA) when its international operations were launched in 2004” and the proposed structure of the Virgin International Airlines Holding Pty Ltd (VAIH) entity was to “ensure ongoing compliance with the foreign ownership restrictions under the ANA”.
It is clear the Virgin International Airlines Holding Pty Ltd entity has been structured for the purpose of contravening the requirements of foreign ownership requirements of the ANA and that the VAIH entity serves no commercial or operational purpose and has no value for VAIH shareholders.
The most notable factors of this entity are:
a. The VAIH shares are “considered to have minimal value” ($0.000001/share) and “shareholders should not expect to receive any distributions of income or capital from VAIH”.
b. Interest in “VAIH shares is non-transferrable”.
c. A service agreement between VAIH and VAA (A VAH entity) gives “VAA to exclusively manage all of VAIH Operations”.
My questions for the minister are:
1. Considering the foreign ownership requirements of the Air Navigation Act and with all probabilities considered the VAIH entity does not operate as a going concern; or acts independently of VAH (being majority foreign owned); and has no or limited commercial value for its shareholders, do you believe this entity should be allowed to operate as an Australian foreign airline. If so, why?
2. Are you aware of ministers, other members of parliament including those in opposition being aware of the proposed VAIH entity before statements of the proposed entity were made to the public?
3. Are you are aware of VAH or any other associated entity making representations to the government and opposition of the time and if so are you aware of ministers of the government or the opposition giving support for the VAIH entity before details of the entity were made public ?
4. Does the government have a commitment to continue upholding maximum foreign ownership requirements for Australian international airlines and if so is it proposing to amend the Air Navigation Act to ensure entities such as VAIH comply with the provisions of the act?
5. Do you believe in issuing VAIH shares that have no voting rights or any commercial value for shareholders (many of whom are retail investors) that VAH has acted appropriately as a corporate citizen; and if the government does believe VAH has acted appropriately does the government have any concerns this type of corporate behaviour could undermine the rights of retail investors in the future?
http://www.asx.com.au/asxpdf/20120223/pdf/424jvsx6d984jf.pdf
http://www.comlaw.gov.au/Details/C2009C00136
Tomcat Terry
says:@ Travelhound
You get my vote for AJ’s job.