VIRGIN AUSTRALIA: Returns to international flying with Qatar Airways deal

Qatar Airways gets its additional flights into Australia via wet leasing to Virgin Australia. Virgin Australia will now return to long-haul international flying when Qatar Airways takes up a 25% stake in the airline. Bain Capital, the current majority owner, now gets a partial payday from its investment in Virgin Australia.

Let’s hope this deal doesn’t further affect benefits Qantas frequent flyer members get through Qatar Airways membership of the OneWorld Alliance.

‘Qatar Airways has been a valued codeshare partner of Virgin Australia since 2022. This investment by the world’s best airline will deepen an already strong partnership by bringing critical scale and the best industry expertise to support our long-term competitiveness and growth.’

Jayne Hrdlycka CEO Virgin Australia

The Deal

Qatar Airways is to purchase a 25% minority stake in Virgin Australia from majority owner Bain Capital. The Foreign Investment Review Board (FIRB) must approve that part of the deal.

Beginning in mid-2025, Virgin Australia will launch flights from Brisbane, Melbourne, Perth and Sydney to Doha, Qatar Airways hub, subject to ACCC (Australian Competition and Consumer Commission) approval.

Not having any aircraft capable of flying this route, Virgin Australia will ‘wet lease’ these aircraft and services from Qatar Airways. A ‘wet lease’ is when fully staffed and crewed aircraft are hired from another airline. This will be a similar arrangement to what Qantas does with Finnair aircraft and crew for some services between Sydney and Bangkok,

Flying to Doha gives Virgin Australia passengers connections to over 100 destinations across Europe, the Middle East and Africa.

The advantages for Virgin Australia

This deal is a great way for Virgin to expand. International flying will help Virgin compete with its rival, Qantas. The airline’s inability to easily redeem points earned on domestic flights and credit card activity for international destinations has been a major disadvantage. With this deal, redemptions for international flying will be easier, making Virgin Australia much more competitive with Qantas.

‘I am delighted that our closer relationship allows us to put our ‘toe in the water’ regarding long-haul international, as well as the ability to deepen other areas of existing cooperation, including between our respective loyalty programs and code sharing arrangements.’ 

Jayne Hrdlycka CEO Virgin Australia

International Network without the investment in new aircraft

This is a great way for Virgin Australia to test the long-haul destination waters without a massive investment in a whole new fleet of aircraft, crew, training and pilots. Wet leasing gives them the advantages of a long-haul fleet without the expenses. It’s more expensive operationally, with less profit, but it avoids a lot of capital debt on the balance sheet too. That’s an advantage if you are still trying to float an airline on the stock exchange.

Gives the finger to Qantas

There is some ironic deliciousness to this deal, too. Notionally, Qatar should be best buddies with Qantas, given that they are both members of the OneWorld Alliance. But that has not been the case since 2013, when Qantas buddied up with Emirates to expand its international footprint.

‘We are really pleased to be announcing our proposed strategic investment in Virgin Australia today. The alignment of our two airlines is significant, the relationships are deep, and we could not be more proud to bring even more great value and choice to all Australians. The investment further demonstrates our strategic alignment with Virgin Australia and our collective ambition to deliver the best possible service and value to Australian passengers.’

Badr Mohammed Al-Meer, Qatar Airways Group CEO Eng.

The Emirates/Qantas partnership endures until today and still pisses Qatar off. The tension started under Qatar CEO Akbar Al Bakar’s reign and continues with new CEO Badr Mohammed Al Meer. Not only does this deal reduce the need for Qatar to cooperate with Qantas, but it actually aligns Qatar with its major domestic competitor, Virgin. So yah boo sucks, Qantas!

It is already reported that Qatar Airways is preferencing Virgin Australia Velocity members for redemption of award seats – and, according to some, restricting their availability to Qantas frequent flyers. Some are reporting that Qantas is only getting the dregs of the poor value Ecconomy Class cabin, and not QSuite redemptions.

Avoids complications of Department of Transport approval

Qatar had its request to double the number of flights to Australia rejected back in 2023. Qantas opposed the request, making the current Australian Government look very much like it was in Qantas’s pocket.

There were some valid potential reasons, but Transport Minister Catherine King couldn’t quite settle on one in her public statements. It had something to do with preserving the Australian industry or respect for women. Remember the Australian passengers subjected to non-consensual internal searches after the newborn incident at Doha airport?

Wet leasing from Qatar avoids all of these Transport ministerial approvals. Although it required FIRB and ACCC approval, both are independent bodies not subject to the capriciousness of government ministers.

Codeshare flights

The shareholding also makes Qatar a powerful ally of Virgin Australia. Qatar now has a financial stake in Virgin’s success, which is brave given that Qatar was one of the investors who lost a lot of money when Virgin Australia collapsed at the beginning of the pandemic.

This will also give Virgin Australia customers access to a broader range of codeshared destination with Qatar. Flights to earn and redeem Velocity or Qatar Privilege Club points will also be increased.

2PAXfly Takeout

When I first heard the rumours that Qatar was considering taking a 25% stake in Virgin, my though was why?

I’m now more of the view that this is a genius move for both airlines.

For Virgin it gives it access to an international network that enables better competition with Qantas. It’s an international arm without the investment and most of the risk.

For Qatar, both expands and solidifies its position in Australia without having to depend on the vagaries of ministerial approval. Qatar can double or more its flights into Australia, plus they get jointly marketed with Virgin. The partnership with Virgin gives them an additional feed into their network from the Australian market. Qantas and Virgin customers can now both book with Qatar. Win—win!