[Peetwo]

Mick Mack sacrifices a Virgin for a REX?? - 

A fascinating and potentially politically revealing AFR article on the VA timeline of destruction... 
(ps love the Cartoon - )

Chaos on Virgin's last flight

Every time the company analysed a new federal government support package for the airline industry, Virgin seemed to come off second best.
Apr 24, 2020 – 12.00am

During the last four weeks of Virgin Australia's life as a public company the team inside the airline's war room never ceased to be surprised by the federal government's apparent bias against the company.


Every time the company analysed a new federal government support package for the airline industry – there have been about four of them – Virgin seemed to come off second best.

This did not destroy the optimistic view within the rescue team, led by chief executive Paul Scurrah, that a rescue package could be negotiated. The company remained positive about avoiding insolvency because of the strong support from key figures in Canberra.  



Deputy Prime Minister Michael McCormack has defended his aviation rescue packages as being fair to all.  David Rowe

Multiple sources within the Virgin advisory team say that Treasurer Josh Frydenberg expressed support for some sort of rescue as did secretary of the Department of Infrastructure Simon Atkinson, Treasury secretary Steven Kennedy and other unnamed cabinet ministers.

Virgin had a strong team of advisers including Julian Peck from Morgan Stanley, Nick Brown and Geoff Davis from UBS, retired UBS executives Guy Fowler and Matthew Grounds, Jim McKnight from debt restructuring specialists Houlihan Lokey and influential political adviser Ian Smith.

But all this intellectual firepower could not overcome the deep-seated opposition within Prime Minister Scott Morrison's office to a government rescue.

"The Prime Minister never engaged with us," said a source involved in rescue negotiations. "We could not even get into his office."

Philip Gaetjens, the secretary of the Department of Prime Minister and Cabinet, always made it clear to the Virgin advisers he did not support a rescue.

But Virgin's board, led by Elizabeth Bryan, and Scurrah and his team were given enough encouragement from influential players in the government to keep reworking its rescue plan.

Voluntary administration suits private equity because it means about $2 billion in unsecured debt can be written off or be slashed in value.

By the time the board decided to call in Deloitte on Monday night there had been a total of seven different rescue packages. The final rescue package put to the federal government last weekend needed a government debt guarantee of about $200 million.

What irked the company and its advisers were the loud public statements from the government that it was supporting the entire sector when Virgin believed this was far from the truth.

When Deputy Prime Minister and Transport Minister Michael McCormack announced a $715 million package on March 18 it was billed as an industry-wide solution to help get airlines through the coronavirus pandemic.

But when Scurrah looked into the details of the package he found Virgin would only get about $71 million in cash flow benefit from the waiver of landing fees normally paid to the government. Based on Virgin's analysis the bulk of the money was going to the two government bodies.

A spokesman for McCormack says the $715 million package was open-ended and could cost much more if the virus lockdown of airlines continues for longer than expected.

Virgin's board and advisory team were shocked when McCormack announced a Regional Aviation Rescue Initiative, which included $198 million to maintain regional air services and a $100 million to cover a cash squeeze at small regional operators.

Virgin heard from multiple sources in the government that the bulk of the $198 million would go to Regional Express Holdings (REX), a company controlled by interests in Singapore.

At a time when the government was saying it would not bail out Virgin's foreign shareholders it seemed the government was making a cash grant to a foreign owned airline without asking its shareholders to tip in any money.

A REX spokesperson refused to comment on how much of the $198 million the airline was receiving because the details were "commercial in confidence".

A spokesman for McCormack says while the details of the rescue package are confidential, less than half the money is going to REX.

Virgin's next big shock in terms of its perception of the government's apparent bias came on April 10 when Scurrah obtained a copy of an email circulated to staff at Qantas by Nicholas Bull, head of customer experience.

Bull's email told of arrangements for federal government funded services to ensure airline services were maintained between capital cities and regional areas.

Scurrah got straight on the phone to McCormack to demand why Virgin had not been included in the program which he had only learned about through the leaked Qantas email. McCormack allegedly referred Scurrah to his department for clarification.

A spokesman for McCormack says Virgin was included in the $165 million program from the beginning and it had not been left out. He did admit that the idea for the program came from Qantas.

Scurrah was pleased to be included in the program given Virgin was suffering a run on its frequent-flyer program and he was trying to preserve cash flow.

But when Virgin joined the program it found it was going to get only 21 per cent of the money but was providing 40 per cent of the flights, according to sources at Virgin. This led to another complaint to McCormack's office which triggered another referral to his department.

Virgin knew the company was destined for voluntary administration late last week when the government's political messaging switched to the need for a "market solution".

"When we heard that we knew we were dead," said someone involved in the final negotiations for a Virgin rescue package.

The "market solution" was repeated over and again in the days leading up to the appointment on Tuesday of Deloitte, which is trying to find a buyer for an airline with 10,000 employees and $5 billion in debt.

The market solution phrase was used by Frydenberg, Finance Minister Mathias Cormann and Morrison.

This unified government position was at odds with what had transpired in the previous few weeks.

There is a belief within the Virgin bunker that this phrase came from a senior executive at a private equity fund who had been lobbying the government late last week to stop the government rescuing the airline.

Needless to say voluntary administration suits private equity because it means about $2 billion in unsecured debt can be written off or be slashed in value to 10¢ in the dollar.

A senior person in the Virgin rescue team said the dissonance in the evolving situation over the past month came from the gulf between the statements made by government ministers and the facts as Virgin saw them.

At no stage did the airline ask for the government to bail out its foreign shareholders, but this was an easy political message to sell.

Virgin never went as far as to remind the government of past rescue packages such as the $3.5 million federal government loan to Kendell Airlines to keep it flying regional routes in 2001 and the $4 million federal grant to National Textiles by the Howard government in 2000 to cover workers' salaries.

The collapse into administration of Virgin Australia has presented a perfect opportunity to work out who in business and politics supports government bailouts.

Nothing divides the political and business community more deeply than the idea of using government money to support a particular company.

Clarification: While Virgin's advisers could not meet Prime Minister Scott Morrison, Virgin chief executive Paul Scurrah met him two weeks before the company collapsed.

Multiple sources within the Virgin advisory team say that Treasurer Josh Frydenberg expressed support for some sort of rescue as did secretary of the Department of Infrastructure Simon Atkinson, Treasury secretary Steven Kennedy and other unnamed cabinet ministers. - Hmmm...interesting, so Mick Mack is directly in conflict with both his current and former Department Secretaries?? 

Next, yet another 'passing strange' story of  dissonance and possible political conflicts of interest with still more Murky Chinese connections...

Swissport airport ground staff member Martin Bates working at Brisbane Airport. Picture: Jen Dainer

ROBYN IRONSIDE
AVIATION WRITER
@ironsider

SIMON BENSON
NATIONAL AFFAIRS EDITOR

10:12AM APRIL 23, 2020
67 COMMENTS
Airport ground operations company Swissport has been accused of misrepresenting its role in the aviation industry by suggesting airlines would be unable to operate if it was forced to significantly downscale its services.

The company, which is owned by Chinese conglomerate HNA Group, has demanded a $125m rescue package from the federal government, due to a dramatic loss in revenue as a result of the coronavirus crisis.

Swissport warned that without government assistance, it would have to axe 80 per cent of its workforce who perform ground operations for aircraft including security and baggage handling.

The company would also look to sell baggage-loading equipment and aircraft-towing trucks, stairs and container loaders.

Deputy Prime Minister Michael McCormack told The Australian he would seriously consider the request and urged Swissport to access the JobKeeper program to help maintain 2000 jobs.

But concerns have been raised within the aviation industry that Swissport was overstating its role in the sector, and others would step in if the company was unable to continue.

Aviation consultant Neil Hansford said Qantas Handling, dnata and Menzies could replace Swissport tomorrow.

“It’s not as if it’s even a duopoly. There are plenty of players,” Mr Hansford said.

Qantas and Jetstar are also understood to be unconcerned by the impact on their operations of a potential reduction in Swissport’s services.

Speaking to Alan Jones on radio 2GB on Thursday, Swissport executive vice president for the Asia Pacific, Glenn Rutherford denied he was under pressure from the company’s Chinese owners to lean on Australian taxpayers.

“I’ve never once spoken to a member or an employee of HNA, not once, and there’ve been no instructions whatsoever,” Mr Rutherford said.

“There are some concerns about HNA’s (financial) position but what I can say is that Swissport in Australia has been operating for almost 30-years and has been profitable in every year of its operation.”

He would not say if Swissport had approached HNA for financial assistance, as its revenue dried up.

“At this point, we’re not requiring any money. We have got a good balance sheet as it stands,” said Mr Rutherford.

“What I do have is a revenue crisis that will run out. In normal circumstance when a business loses all of its revenue it has two levers – find new revenue which is not available to us, or it reduces costs. I don’t want to take that course of action.”

The HNA group is also a major shareholder in Virgin Australia that went into administration on Tuesday with more than $5bn of debt. The company is believed to owe Swissport millions of dollars that may never be recovered. 

Deputy Prime Minister Michael McCormack told The Australian he would seriously consider the request and urged Swissport to access the JobKeeper program to help maintain 2000 jobs. - Hmm...when you refer back to this March 2019 Ben Fordham 2GB interview transcript with Mick Mack you begin to wonder which Chinese Triad the miniscule is actually beholden to??

BEN FORDHAM:

You’ve spoken about regional areas just now and to be fair to you that’s the reason I asked you on today. We know that Chinese companies and airlines are taking over regional airports and building these flight schools for Chinese pilots; China is using our airspace and our airports to train their trainee pilots. At the same time, we know that there’s a huge shortage of Australian pilots and I know that Dick Smith says there are fewer places now for Aussie pilots to train. Look, I’m going through the list here and it’s hard to get our head around it but when we talk about these Chinese training facilities at our airports, there’s one at Port Macquarie and Kempsey – I know you’ll correct me if I’m wrong – run by the Australian International Aviation College which is owned by China’s HNA Group, that’s Port Macquarie and Kempsey. You have a training facility at Moorabbin Airport in Victoria, owner China Eastern Airlines; a training facility at airports in Perth owned by China Southern Airlines; plans for one at Frogs Hollow airfield in Bega Valley; Virgin has announced a training facility at Tamworth Airport run by Australian International Aviation College which is owned by China’s HNA Group; Mareeba Flight School in Queensland, the owner Shanghai Jiao Tong University; an international flight school just opened at Mildura Airport to train Chinese pilots: Are we seeing a trend here, Minister?

MICHAEL MCCORMACK:

Look you’ve just named four that were probably owned by Chinese interests; they would be possibly part-owned by Chinese interests. Look, despite a lot of speculation there’s no evidence of substantial foreign ownership of regional airports and aviation training facilities or indeed the training of foreign pilots. At the end of the day too, the ACCC, the Foreign Investment Review Board – they have a big say in these sorts of things. The Foreign Investment Review Board was given additional powers back in 2015 to investigate ownership by foreign state-owned enterprises, whether it’s aviation or whatever, regardless of value, to ensure that it’s in Australia’s national interest.

BEN FORDHAM:

Is it in the regional interest, of these regional areas, when you consider that these regional airports are being taken over by foreign-owned companies?

MICHAEL MCCORMACK:

I don’t think they’re being taken over. I think a lot of the speculation is unfounded. The fact is….

BEN FORDHAM:

Is anything incorrect as far as what I just ran through there about Port Macquarie, Kempsey, Moorabbin Airport, a couple in Perth, Bega Valley, Tamworth, Mareeba, Mildura – is any of that incorrect?

MICHAEL MCCORMACK:

The fact is if it was against the national interest, the Foreign Investment Review Board would have stopped it. The fact is they have to comply with ACCC. The fact is, there’s always going to be speculation when Chinese investment, when Chinese money comes into Australia, but at the end of the day you look at CASA – CASA has actually recorded an increase in the number of flying schools on its register from 210 in 2012 to 235 in 2014. So to actually even say that there are less and less training schools is wrong. The number currently sits at 250…

BEN FORDHAM:

…and you’re not concerned about the increasing presence of Chinese ownership of these airports?

MICHAEL MCCORMACK:

Of those that you mentioned there were four that are currently run and either fully owned or part subsidiaries of Chinese interests.

BEN FORDHAM:

What are the four?

MICHAEL MCCORMACK:

The ones that you mentioned; you ran through the list; it was the first three you mentioned and then the fifth of the sixth one, Mareeba. So of those, yes there is some Chinese interest in it. Foreign investment has made this country what it is, and whether that’s in agriculture, whether that’s in aviation, the fact is they see that Australia is a good place in which to invest. They are actually training pilots, some of whom may well take up residence and may well be flying in Australia. I come from Wagga Wagga where we have the Australian Airline Pilot Academy, run by Rex. It’s actually training Vietnamese pilots. Now if anyone around Wagga Wagga suggested well that’s a bad thing, the fact is it’s actually putting $1 million into the Wagga Wagga local economy through accommodation, through petrol, through…

MTF? - Yes much! P2