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Speaker 1: The Australian Financial It was always going to be an

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Speaker 1: eventful day for Virgin Airlines as it returned to the

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Speaker 1: stock market on Tuesday, but no one predicted it will

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Speaker 1: be this dramatic. Israel's Defense minister has acknowledged that they

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Speaker 1: have carried out strikes against Iran, the first time in

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Speaker 1: month of Iran.

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Speaker 2: Fired two waves of missiles overnight towards Israel.

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Speaker 3: The United States as dramatically entered Israel's war against Iran.

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Speaker 2: News of the temporary closure of Katari airspace threatened to

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Speaker 2: overshadow Virgin's float. In the days leading up to its listing,

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Speaker 2: Israel and Iran traded missiles and the US entered the fray.

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Speaker 2: The prospect of a broader conflict and a spike in

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Speaker 2: fuel prices was not good news for the airline industry.

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Speaker 2: But then suddenly, on Tuesday, the conflict deescalated and there

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Speaker 2: was talk of a ceasefire. Time for a relieved Virgin

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Speaker 2: CEO Dave Emerson to ring the bell.

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Speaker 4: Investors are buying Virgin shares today as the airline goes

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Speaker 4: public in one of the most hotly anticipated floats.

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Speaker 2: In a strong result, Virgin's shares jumped eleven percent on

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Speaker 2: the first day of trading. But now the airline must

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Speaker 2: stay on track and ensure history doesn't repeat.

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Speaker 4: There's just something about airlines, There's something about aviation executives

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Speaker 4: is so tempting for these guys to expand and try

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Speaker 4: and compete with the likes of Quantas.

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Speaker 2: Welcome to the Finn. I'm Lisa Murray. This week, senior

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Speaker 2: reporter Aisha decrets Her and chanticlear columnist Anthony McDonald on

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Speaker 2: Virgin's way back to the market, why it could struggle

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Speaker 2: to stay in its lane, and whether Australia can ever

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Speaker 2: sustain more than two airlines. It's Thursday, June twenty six.

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Speaker 2: Hi Aisha, Hi, and thanks for coming on the podcast.

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Speaker 4: Thanks for having us, Lisa.

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Speaker 3: Thanks Lisa.

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Speaker 2: And when a company lists on the AOSX, it's usually

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Speaker 2: an exciting day, but Virgin's IPO was particularly dramatic on Tuesday.

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Speaker 2: Its executives were up in the early hours of the

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Speaker 2: morning dealing with the diversion of flights following Iran's decision

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Speaker 2: to launch missiles at a US base in Qatar, But

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Speaker 2: the day ended well. How would you rate Virgin's return to.

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Speaker 4: The market, Lisa, This was in the hands of the gods,

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Speaker 4: and the gods.

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Speaker 5: Smiled, so so much could have gone wrong, Like Virgin

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Speaker 5: did well to raise at six hundred and eighty five

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Speaker 5: million dollars for its IPO, but that was three weeks ago, Lisa,

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Speaker 5: like so much has happened in the past three weeks,

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Speaker 5: so much that could have really impacted investor's sentiment.

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Speaker 4: And how would trade on listing. You know, you had

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Speaker 4: Israel and Iran and the US bombing Iran, the oil

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Speaker 4: price spike every the weekend, the threat of retaliation strikes

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Speaker 4: like at worst could have sunk the float. Lisa, like

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Speaker 4: Bayan might have had to have pulled this float. I mean,

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Speaker 4: at best, you would have thought it would scare off

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Speaker 4: some investors and the stock would trade down, But almost miraculously,

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Speaker 4: the whole thing calmed down Monday night in the US

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Speaker 4: right ahead of the listing on Tuesday morning austral In time,

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Speaker 4: Trump was even talking about a ceasefire in the Middle East,

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Speaker 4: which is something that we certainly didn't see coming. And

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Speaker 4: by midday when it was time to list, the market's

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Speaker 4: mood was risk on. Investors were keen to by stocks,

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Speaker 4: and Virgin landed in smooth markets. It opened up seven

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Speaker 4: and a half percent and held those gains for most

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Speaker 4: of its first day. Now normal times, Lisa, you'd say

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Speaker 4: that's a solid debut. It's nothing miraculous, But given what

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Speaker 4: the market conditions were like, given what's been happening in

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Speaker 4: the Middle East, you'd say it's a remarkable daboot.

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Speaker 2: And before we get to what happens next, take us

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Speaker 2: back to mid two thousand when the airline launched as

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Speaker 2: Virgin Blue in a marketing blitz led by Richard Branson.

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Speaker 2: How did Virgin secure its place in the Australian aviation market.

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Speaker 4: They launched with a mystery flight to Marichid of all places.

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Speaker 4: At the time, it was called Virgin Blue because its

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Speaker 4: first planes were red and blue is the Australians saying

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Speaker 4: for redhead now at least. It started services in August

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Speaker 4: two thousand, in the lead up to the Sydney Olympics.

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Speaker 4: Set up by Branson and Brett Godfrey, based in Brisbane

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Speaker 4: as a low cost carrier. At first it had only

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Speaker 4: two planes, but then in September two thousand and one.

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Speaker 2: When the last flight touched down in Sydney this morning,

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Speaker 2: Ansets passed into aviation history.

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Speaker 4: Antet Australia, which was the number two airline in Australia.

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Speaker 4: It collapsed and Virgin all of a sudden became the

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Speaker 4: second biggest airline now. It's I'm say Virgin contributed to

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Speaker 4: the collapse of Inset because it had turned down and

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Speaker 4: off from Singapore Airlines an Anset to buy Virgin and

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Speaker 4: Branson he actually called a press conference pretending he'd accepted

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Speaker 4: the deal.

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Speaker 5: Anyway, I'm off to England with my court pavillion dollar

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Speaker 5: check and thank you very much.

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Speaker 4: Before announcing he was only joking and ripped up the check.

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Speaker 4: I'm just joking. It's pitch was there was younger, funer

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Speaker 4: and less expensive than quantious. It did widespread marketing or.

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Speaker 3: Richard Branson will launch an assault on the Australian domestic

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Speaker 3: travel market this morning, rebranding Virgin Blue as Virgin Australia.

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Speaker 4: The big sort of change came in twenty eleven when

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Speaker 4: it rebranded as Virgin Australia. What we're building here is

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Speaker 4: an airline that he still has very competitive airfares, but

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Speaker 4: he's also very competitive at the front end of the aircraft.

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Speaker 4: To try and move the company on from its low

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Speaker 4: cost Virgin Blue roots. It became a more full service

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Speaker 4: airline and started targeting business flight.

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Speaker 3: Virgin Australia has a new strategy and its rivalry with Quantus.

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Speaker 2: It's unveiled a luxury aircraft for use on domestic roots Now.

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Speaker 4: Twenty fourteen, Virgin bought Tiger Airways, an airline you might

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Speaker 4: remember now. It was sort of copying Quantus, which had

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Speaker 4: launched Jetstar as a low cost carrier to try and

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Speaker 4: keep Virgin Blue out of the market. And Virgin at

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Speaker 4: the time was run by a guy called John Borghetti.

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Speaker 4: There is an alternative now and it is for the

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Speaker 4: first time in over a decade, in fact, sinceanst stopped

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Speaker 4: playing Did you have a two carriers now that can

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Speaker 4: serve us all elements of the market. It was trying

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Speaker 4: to take on Quantas that was spending lots of money

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Speaker 4: on lounge's furniture, business class flights, all this costly sort

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Speaker 4: of premium stuff. And that's because there was a bit

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Speaker 4: of rivalry between Borghetti and Alan Joyce, who was running Quantus.

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Speaker 2: Virgin chief executive John Borghetti took over Virgin after being

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Speaker 2: post over for the top job at Quantus three years ago.

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Speaker 4: They both worked at quantas Joyce had won the CEO

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Speaker 4: spot and Borghetti went Virgin, and he decided to take

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Speaker 4: them on.

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Speaker 3: John Borghetti, how satisfying is it to get this job

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Speaker 3: given you missed out on the CEO role at Quantus.

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Speaker 4: I think this job is an incredible opportunity and one

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Speaker 4: that I'm looking forward to very much, irrespective of any

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Speaker 4: other job. As part of it, Virgin built a frequent

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Speaker 4: fly business called Velocity. At one stage it even sold

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Speaker 4: a stake and it's private equity, and then brought that

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Speaker 4: stake back using a lot of debt, closed borders and

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Speaker 4: grounded planes. The coronavirus pandemic has the airline industry facing

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Speaker 4: the worst crisis in its history. So by that time

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Speaker 4: the pandemic struck in early twenty twenty, Virgin all of

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Speaker 4: a sudden had lots of debt as planes were in

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Speaker 4: the sky, and the whole thing went into administration.

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Speaker 2: I share all airlines were grounded by COVID. Why was

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Speaker 2: Virgin affected more than other airlines and how did it

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Speaker 2: manage to turn the business around?

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Speaker 3: So I think his aunt mentioned had just had too

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Speaker 3: much debt. More than five billion dollars had been racked up,

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Speaker 3: and I think the recriminations can fly over who acquired

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Speaker 3: all of that debt and on what and whether it

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Speaker 3: was useful. Some people would say that chasing quantas and

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Speaker 3: trying to be premium was a good strategy. Others would

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Speaker 3: say buying the stake in Velocity back at the wrong

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Speaker 3: time meant that Virgin tipped into administration. So people can

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Speaker 3: kind of argue over what was the straw that broke

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Speaker 3: the Campbell's back. But I think what we can say

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Speaker 3: is that the foreign shareholders that sat on Virgin's register,

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Speaker 3: which were Singapore Airlines, Eddie had China's nan Chan Group,

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Speaker 3: all owned about twenty percent each, and they sort of

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Speaker 3: weren't the most useful of shareholders because all state owned,

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Speaker 3: they didn't have necessarily shareholder profits at the heart of

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Speaker 3: what they did, and they all had a different strategic

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Speaker 3: plan for Virgin. The airline had to temporarily stand down

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Speaker 3: about eight thousand of its workers while borders were shut

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Speaker 3: during that pandemic. Virgin Ground did eight thousand people now

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Speaker 3: out of work.

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Speaker 4: It is what it is done, it is what it is.

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Speaker 4: We're all in this together. There's nothing we could do.

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Speaker 3: Paul S Garret, the CEO who did buy back that

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Speaker 3: stake in Velocity. He'd asked the government, Morrison government for

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Speaker 3: a one point four billion dollar loan.

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Speaker 4: There was an enormous man of estort Peter to try

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Speaker 4: and get the support from the federal government. And look,

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Speaker 4: it was their decision and we respect that decision because

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Speaker 4: of the effort we put in. It felt a little

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Speaker 4: bit disappointing, but there.

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Speaker 3: Was a bit of lobbying behind the scenes by a

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Speaker 3: number of players, including Quantis and ultimately Scott Morrison and

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Speaker 3: Josh Fredenberg, who was the Treasurer at the time. They

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Speaker 3: went for a market based solution that was proposed by

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Speaker 3: Nicholas More, the former CEO of Macquarie, who said that

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Speaker 3: actually allowing the airline to tip into administration was a

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Speaker 3: better kind of option and letting the market find a

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Speaker 3: solution so very much. The imperative from Moore and others

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Speaker 3: at the time was to make sure that whatever happened

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Speaker 3: coming out of the pandemic, there was still a strong

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Speaker 3: competitor Aquantas. So what happened was Deloitte was appointed as

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Speaker 3: the administrator.

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Speaker 4: Virgin's the biggest casualty so far as COVID nineteen ricks

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Speaker 4: havoc on Australia's locked down economy.

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Speaker 3: There was a sale process run and in the end

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Speaker 3: it was US private equity firm Bank Capital that won

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Speaker 3: to rescue Virgin out of administration. Private equity fund Bain

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Speaker 3: Capital looks set to become the new owner of Virgin

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Speaker 3: Australia after New York hedge fund Cyrus Capital Partners withdrew

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Speaker 3: its offer. They sacked three thousand staff and they really

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Speaker 3: bought an airline that had halved the number of aircraft

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Speaker 3: and renegotiated hundreds of contracts to reset its cost base.

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Speaker 2: And former CEO Jane Hrdlicka came on board once Bain

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Speaker 2: took over. How much credit can she take for the

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Speaker 2: turnaround and why didn't she take the airline all the

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Speaker 2: way to the IPO.

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Speaker 4: Jane used to work for Baane and Company. That's the

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Speaker 4: management consulting arm that's the sister company to Baane Private Equity,

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Speaker 4: and there's a lot of crossover between the two. They

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Speaker 4: know her, she knows them. She was involved in this

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Speaker 4: from the start before Virgin collapsed. When Bain Private Equity

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Speaker 4: opened its file, they pretty quickly got her on. She

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Speaker 4: used to work for Jetstar. She knows airlines she knows

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Speaker 4: Bain and she was available. She's quite dogged, she's well

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Speaker 4: known in the market, she's got a particular style, and

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Speaker 4: they thought this is someone who can really be involved

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Speaker 4: in the turnaround with us. It was a bit controversial

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Speaker 4: at the time because Jane can be a divisive character,

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Speaker 4: but she can also be quite effective at what she does. Virgin,

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Speaker 4: as I just said, was run by a blake called

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Speaker 4: Paul Scurra. It was sort of widely anticipated that he

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Speaker 4: would continue to run Virgin under Baine's ownership, but pretty

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Speaker 4: much as soon as Baine got the keys, they threw

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Speaker 4: them over to Jane and said do your best. Yeah.

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Speaker 3: There was always this tension though, I think, and between

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Speaker 3: Scurr's plan for the airline, which was to ke keep

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Speaker 3: it internationally focused, to keep it as a competitor Aquantus

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Speaker 3: on more levels, and what Bain and Herloko wanted to do,

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Speaker 3: which was keep this a very low cost, more domestically

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Speaker 3: focused the airline that wasn't flying long haul international anymore.

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Speaker 4: So Bain's turn around under Jane it was a bit

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Speaker 4: of good management. It's some good luck. I mean, they

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Speaker 4: used the administration framework and the laws around it to

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Speaker 4: completely reset the airline, get rid of aircraft's, renegotiate contracts,

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Speaker 4: refine the customer proposition, change the routes it flies like.

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Speaker 4: In meetings with investors in April, it told them it

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Speaker 4: had changed five hundred contracts since it first went into administration,

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Speaker 4: which is a huge number, Lisa, and it saved a

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Speaker 4: lot of money. So Bain then has the airline after

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Speaker 4: the pandemic. I mean the sector was always going to

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Speaker 4: bounce back. It took a while. Remember that the lockdowns

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Speaker 4: lasted through twenty twenty, twenty twenty one. They were on

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Speaker 4: and off. But then this revenge travel boomed. People were

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Speaker 4: sitting on savings. The flood gates really opened. Aline capacity

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Speaker 4: was lower, and so if you did have a plane

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Speaker 4: with seats on it, prices were up and you were

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Speaker 4: laughing right at the same time, Lisa. Quantas, which is

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Speaker 4: undisputably Australia's biggest airline, number one, it's got two thirds

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Speaker 4: of the domestic market, it shot itself in the foot.

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Speaker 5: You know.

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Speaker 4: It's customers were raging against flight cancelations, COVID credits, lots, baggage,

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Speaker 4: all this basic customer service stuff that Quantus either forgot,

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Speaker 4: how to do during the pandemic, or just wasn't set

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Speaker 4: up to do anymore. It's brand plummeted in the rankings,

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Speaker 4: while Virgins, which looked a bit more sensible and had

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Speaker 4: its act together, perhaps was easier because it was smaller,

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Speaker 4: It's rose up as a result. Now, through it all,

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Speaker 4: Virgin created a new lane for itself and it stayed

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Speaker 4: in it. Jane's an absolute force. She did a good

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Speaker 4: job in firing up the Virgin's staff, getting deals done

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Speaker 4: with unions, even locking in guitar airways as big shareholders.

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Speaker 4: But the problem is Lisa that investors were a bit

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Speaker 4: wary of her. She wasn't the one to take it

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Speaker 4: to the IPO. She did a lot of the heavy lifting,

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Speaker 4: a lot of the prep work, got this turnaround on

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Speaker 4: track and sort of helped design it. But she wasn't

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Speaker 4: the one ringing in the bell at the ASEX on Tuesday.

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Speaker 4: And you have to ask why, And it's just because

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Speaker 4: the investors did push back against her. Bain realized that,

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Speaker 4: so they replaced Jane with another Bayin and Company former

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Speaker 4: consultant called Dave Emerson. I mean, he has also been

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Speaker 4: involved in the turnaround for a few years now. And

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Speaker 4: the message that he's been selling to investors is that

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Speaker 4: Virgin has found its lane. It's a third of the

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Speaker 4: domestic aviation market. You've got Conscious above it, you've got

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Speaker 4: jet Star below it. Virgin's just in the middle, making

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Speaker 4: pretty good, middling sort of margins from everyday business customers

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Speaker 4: and holiday makers. At least, it's a nice little lane

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Speaker 4: to swim in. Now. The problem is Virgin's been in

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Speaker 4: a nice little lane before. Remember it was the budget

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Speaker 4: carry out I was doing reasonably well. There's just something

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Speaker 4: about airlines. There's something about aviation executives that avgas can

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Speaker 4: go to their heads and it's just so tempting them

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Speaker 4: to go up market, to have business class flash lounges,

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Speaker 4: so tempting for these guys to expand and try and

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Speaker 4: compete with the likes of Quantus. So you have to

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Speaker 4: wonder whether Virgin will be able to stay in its

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Speaker 4: lane long term. I share.

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Speaker 2: We're talking about Virgin Airlines, which floated on the Stock

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Speaker 2: Exchange on Tuesday after managing an impressive comeback from its

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Speaker 2: collapse during the pandemic. What's the outlook for Virgin? Will

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Speaker 2: it stay in its lane or do you think like

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Speaker 2: Ant says it might try and take on Quantus and

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Speaker 2: at some point upset the state of play in the

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Speaker 2: aviation market.

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Speaker 3: I think it's very that Virgin has told investors that

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Speaker 3: it knows its place. It wants to be the great

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Speaker 3: second airline in Australia and it's very comfortable doing that.

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Speaker 3: It's a very very profitable place to.

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Speaker 2: Be right now.

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Speaker 3: So the outlook right now is helped by very very

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Speaker 3: solid domestic aviation industry. Australia is unique in having only

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Speaker 3: two airlines at the moment. You know, the Regional Express

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Speaker 3: that tried to take on Virgin and Quantus on capital

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Speaker 3: city routes and ended up in its own administration process.

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Speaker 3: We also saw discount airline Bonser that came and tried

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Speaker 3: also failed within a year. So I think when it

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Speaker 3: comes to staying in your lane, the thing that always happens,

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Speaker 3: and you know, we can say that it's a market

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Speaker 3: for two airlines until we're blue in the face. There

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Speaker 3: will always be a third competitor that comes and goes.

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Speaker 3: You know, whether they last for more than twelve months

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Speaker 3: is another story, but someone will try and I think

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Speaker 3: at that point that's when airlines need to decide what

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Speaker 3: is going to be your proposition, and I think that

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Speaker 3: one of the things Virgin has emphasized as a point

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Speaker 3: of growth as it goes to investors with a growth

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Speaker 3: story is that the Velocity frequent flyer program will grow. Now,

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Speaker 3: growing your frequent flyer program when you don't have a

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Speaker 3: long and big international network like Quantus is quite challenging.

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Speaker 3: Do people want to be part of a frequent flyer

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Speaker 3: network where you can redeem on flights from Melbourne to

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Speaker 3: Sydney or to the Gold Coast versus going to London

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Speaker 3: or flying business class life flat to New York. Probably not.

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Speaker 3: It's a less attractive proposition, So there will always be

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Speaker 3: the temptation to get back into long haul. The problem

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Speaker 3: is scale, So getting new planes to be able to

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Speaker 3: fly enough to make your network a genuine competitor to

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Speaker 3: Quantus is going to take a long time. You know,

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Speaker 3: right now we're seeing uncertain fuel prices with what's happening

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Speaker 3: in the Middle East. There are a lot of unknowns

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Speaker 3: in the market, and that's always the case with aviation.

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Speaker 3: But I think we can be sure of you kind

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Speaker 3: of two things. One that a third competitor will spring up,

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Speaker 3: and two, as ant says that at some point they'll

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Speaker 3: get ambitions to.

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Speaker 4: Grow at least a Virgin's time. That's float quite nicely.

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Speaker 4: I mean, Bain did get lucky. It's taken a couple

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Speaker 4: of years of IPO preparations for it to get its

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Speaker 4: ducks in line here and relist the business. The domestic

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Speaker 4: aviation industry backdop just sort of got better and better

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Speaker 4: in that time. And if you're buying Virgin shares now,

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Speaker 4: you have to ask, is this as good as it

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Speaker 4: gets for the industry. If so, is Virgin doing anything

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Speaker 4: internally to increase its margins to be more robust and

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Speaker 4: a better position. Should should the industry not be as

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Speaker 4: good as it is now in the future. I mean

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Speaker 4: there's always skepticism buying shares of private equity, and that's healthy.

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Speaker 4: You know, Bain's made truckloads of money or ready from Virgin.

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Speaker 4: It's probably made three or four times the amount of

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Speaker 4: money put into it, and it's still going to own

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Speaker 4: thirty nine percent of the listed Virgin. As far as

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Speaker 4: private equity stories go, I'd say this is a good one.

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Speaker 4: You know, it's a financial investment that's stepped up in

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Speaker 4: a tough period, took risk oversur sensible turn around story.

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Speaker 4: But now, of course it's private equity and it's trying

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Speaker 4: to get some bang for its buck. It's trying to

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Speaker 4: make money and to do that it is selling shares

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Speaker 4: to ordinary Australian investors, to super funds, to institutional investors,

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Speaker 4: basically anyone that can Baine picked this up at the bottom.

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Speaker 4: It's now floating it is it floating at the top?

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Speaker 4: If not, where's the top? And what Convergent do between

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Speaker 4: now and then?

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Speaker 3: I think that that's a good question ed. But they

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Speaker 3: have said that they still have costs that they can

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Speaker 3: keep on eliminating. They say the five years behind Quantus

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Speaker 3: when it comes to taking some of those transformation challenges

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Speaker 3: around it, around how they sell tickets, how they do

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Speaker 3: a lot of things. So they see that there is

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Speaker 3: still growth that they can make through just you know,

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Speaker 3: continuous improvements and incremental kind of revenue and margin improvement

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Speaker 3: that probably isn't there for Quantus.

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Speaker 2: So Aisha, then what does all this mean for the

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Speaker 2: consumer and the cost of air travel? You mentioned before

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Speaker 2: fuel prices and the impact that the uncertainty in the

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Speaker 2: Middle East is having. What does that mean for the traveler?

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Speaker 3: I think what we can see from the Australian domestic

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Speaker 3: market is that having two competitors only in aviation is

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Speaker 3: not great for the consumer. We're in a domestic aviation

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Speaker 3: market where we've seen the price of airfares between Melbourne

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Speaker 3: and Sydney routinely hit over one thousand dollars. We've had

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Speaker 3: periods where loads on planes have been over ninety percent full,

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Speaker 3: which is historically unheard of. So I think unfortunately for consumers,

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Speaker 3: this probably isn't going to be a great thing. Those

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Speaker 3: incremental improvements will be passed on to investors. If fuel

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Speaker 3: prices spike, virgins hedged for six months out, so you know,

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Speaker 3: the impact for investors will be minimal, but they do

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Speaker 3: pass on the impact of higher fuel prices in fuel

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Speaker 3: surcharges that are charged to consumers, So you know, as

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Speaker 3: geopolitical tensions ratchet up, you should probably be prepared to

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Speaker 3: pay a little bit more for your.

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Speaker 2: And the market hasn't had very many big floats in

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Speaker 2: recent years. We've talked a lot about the shrinking of

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Speaker 2: the ax What does the virgin IPO mean for the

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Speaker 2: local stock market?

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Speaker 4: This is a good news story for ax LESA like

382
00:21:14,040 --> 00:21:16,440
Speaker 4: this is Virgin coming home. There is no other owner

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Speaker 4: for it. Airlines globally are either owned by countries themselves

384
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Speaker 4: or they're listed. So yeah, this is good. It comes

385
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Speaker 4: for an AX the time when it needs more listings.

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Speaker 4: Public markets globally they are shrinking. The asex is shrinking.

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Speaker 4: If you look at the number and the value of

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Speaker 4: companies that are coming off the AX, you know, companies

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Speaker 4: that are being bought by private equity or super funds

390
00:21:37,119 --> 00:21:39,680
Speaker 4: or sovereign wealth investors or whatever. The vary of those

391
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Speaker 4: companies is much more than what's coming back through IPOs.

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Speaker 4: So this has been a big shift for Australia and

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Speaker 4: for Australians, And at least the public markets have been

394
00:21:48,240 --> 00:21:51,240
Speaker 4: so great for ordinary Australians for their super fund balancers

395
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Speaker 4: and as direct investors. We're all trying to work out

396
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Speaker 4: where the private markets, you know that's private equity and

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Speaker 4: the like, whether they can be so good for ordinary

398
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Speaker 4: Australians assex trying to work this out as well. And

399
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Speaker 4: while it does that, it's tanking with the listing rules

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Speaker 4: to try and encourage more IPOs. But Lisa Virgin showed

401
00:22:09,560 --> 00:22:12,359
Speaker 4: is you can get an IPO done. There are buyers

402
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Speaker 4: for shares, you just need the right story, the right

403
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Speaker 4: structure and the right price.

404
00:22:16,119 --> 00:22:18,520
Speaker 3: I think this IPO just shows like, look at what

405
00:22:18,560 --> 00:22:22,280
Speaker 3: they've been through. They started these talks with investors before

406
00:22:22,320 --> 00:22:25,520
Speaker 3: Trump went crazy on tariffs, so you know they've come

407
00:22:25,600 --> 00:22:30,119
Speaker 3: through a monumental period in history to get this to market.

408
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Speaker 3: It shows the strength of the domestic Australian aviation market.

409
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Speaker 2: A final question for both of you, then, how will

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Speaker 2: Virgin go from here? And is Australia's domestic aviation sector

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Speaker 2: destined to be a.

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Speaker 4: Duopoly for the foreseeable future. Absolutely, Lisa Australia. I don't

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Speaker 4: think it's just not big enough for a big third player.

414
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Speaker 4: We've seen others try and fail. Look at Rex recently,

415
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Speaker 4: look at Bonza. Australia's even too small sometimes for a

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Speaker 4: second viable airline. We had Virgin go bust, we had

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Speaker 4: Anset go bust. Yes, they're in wobbly markets, but it

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Speaker 4: just shows you how hard it is to run a

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00:23:06,760 --> 00:23:11,080
Speaker 4: decent sized scale network in Australia, which I think makes

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Speaker 4: it really hard to see a third player coming in

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Speaker 4: and really sticking it to Quantus and Virgin. That means

422
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Speaker 4: I think we'll be a two airline town for a

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Speaker 4: while yet. And Lisa, that's actually similar to what Australia

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Speaker 4: is like in a lot of other industries as well.

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Speaker 4: Look at supermarkets, we've got Woolworths and Coals. Look at

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Speaker 4: department stores it's Meyer and David Jones. Look at energy

427
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Speaker 4: it's agl and Origin. Australia is a country of jeopolis

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Speaker 4: and it's hard to see airlines being any different.

429
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Speaker 3: I think no matter what we say, whether it's rational

430
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Speaker 3: or not, there will always be a third airline. I

431
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Speaker 3: think I disagree with you on this point ed. History

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Speaker 3: has shown us that someone will always try to challenge

433
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Speaker 3: contestant Virgin. They see this market as being big enough,

434
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Speaker 3: but you do need the scale, and I think that

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Speaker 3: that means that it will take a little bit of

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Speaker 3: time before we get that third competitor. And you know,

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Speaker 3: conditions are really ripe for Virgin. In the interim, I

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Speaker 3: think the investors have appetite for this. IPO has been

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Speaker 3: really strong, and that's a testament to the fact that

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Speaker 3: we know that no big competitor is coming to take

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Speaker 3: these guys on for at least the next few years.

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Speaker 2: Thanks and thanks Aischa.

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Speaker 4: Thanks for having us.

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Speaker 2: Lisa Thanks Lisa, Thank you for listening to The Finn.

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Speaker 2: I'm Lisa Murray, with senior reporter Aisha Decretza and Chanticleer

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Speaker 2: columnist Anthony McDonald joining the podcast today. The Finn is

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Speaker 1: The Australian Financial Review