Qantas Airways Faces New Competition as Qatar Airways Eyes Virgin Australia Stake

October 01, 2024 02:31 PM AEST | By Team Kalkine Media

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Qantas Airways Faces New Competition as Qatar Airways Eyes Virgin Australia Stake — Image source: Shutterstock

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Highlights

Qantas Airways share price falls amid competition concerns.

Qatar Airways aims to buy a 25% stake in Virgin Australia.

Deal could strengthen Virgin Australia and increase competition in the aviation sector.

The share price of Qantas Airways Limited (ASX:QAN) has dropped by 3%, largely in response to the news that Qatar Airways is planning to purchase a 25% stake in Virgin Australia. This acquisition from Bain, Virgin Australia’s current private equity owner, could create new challenges for Qantas in the Australian aviation market.

Qatar Airways to Strengthen Virgin Australia

The proposed investment by Qatar Airways will enable Virgin Australia to re-enter the long-haul flight market by mid-2025, marking the first time since 2020. According to Virgin Australia, this deal will bring “scale and synergy benefits,” bolstering the airline’s financial stability and supporting its long-term growth strategy.

Virgin Australia passengers will also gain new perks, such as more opportunities for earning and redeeming loyalty points between Velocity and Qatar Airways’ Privilege Club, as well as expanded code-sharing and enhanced connectivity options. Virgin Australia believes this partnership will drive greater competition in the aviation sector, which could be concerning for Qantas.

Potential Impact on Qantas Airways

Virgin Australia has also hinted at a future return to public ownership, a move that would give Australians a chance to invest in the airline’s growth. The deal, subject to regulatory approval, is expected to intensify competition, putting pressure on Qantas' market share and profit margins.

While Qantas has experienced a 30% share price increase over the past six months, thanks to a strong FY24, the introduction of a revitalized Virgin Australia could impact future performance. Although the market may have room for both airlines, the competitive landscape is set to change, particularly with key routes such as Sydney-Melbourne remaining critical to both carriers.

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