Qantas asks regulators to scrutinise Virgin Australia's restructure

Sir Richard Branson. Photo / NZPA

Qantas Airways has called for regulators to take a close look at Virgin Australia's proposed ownership restructure.

Qantas general counsel Brett Johnson says the national carrier is concerned the mooted change is likely to result in foreigners having effective control of the day-to-day operations of Virgin's international operations.

Johnson says this would be in breach of Australia's obligations under the many air services agreements (ASA) with other countries.

"Effective control at the day-to-day management level is of key importance in analysing compliance with obligations under the ASAs," Johnson said in a submission to Australia's International Air Services Commission (IASC) dated Monday.

In a bid to open up the share register to foreign investors, Virgin Australia in February proposed to split its international operations into a separate, unlisted entity that was owned by current shareholders.

The listed company would become a wholly domestic airline and be freed from government regulations requiring all Australian flag carriers operating international services to be no more than 49 per cent foreign owned. Sir Richard Branson's Virgin Group currently holds about 26 per cent of Virgin Australia, while Air New Zealand has a 19.9 per cent stake.

This left little room for other non-Australians, be they airlines or institutional investors, to climb on to the share register in any meaningful way.

Qantas' submission was prompted by Virgin's recent application to IASC to transfer its capacity on Australia-Indonesia services to Virgin Australia International Airlines.

The Flying Kangaroo called on the commission to undertake a comprehensive public review to confirm Virgin Australia International would at all times be in a position to remain a designated Australian flag carrier under the relevant ASAs.

Foley said the proposed restructure created the risk that Virgin Australia International and its subsidiaries would not be entitled to be designated as an Australian carrier.

Virgin closed up A1.5 cents at A45.5 cents, while Qantas ended up A7.5 cents at A$1.73. AAP