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A billion here, a billion there: Regions counting the steep cost of Virgin's demise

Statewide

For Queensland, the pain of a possible collapse of Virgin Australia runs deep, with nearly half of its workforce based in the state.

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With administrators now appointed, there’s obvious concern over how much of the company will survive, with certain knock-on effects for tourism and other industries.

On top of almost 5000 staff and contractors in Queensland, Virgin Australia directly and indirectly supports airports, tourism, hotels, aviation training, travel agents and other suppliers, from fuel to cleaning providers.

Those Queensland suppliers are paid $1 billion per year from the airline, while it is estimated visitors who fly Virgin Australia to Queensland spend more than that again.

No payment for overnight stays

Many regional routes have been suspended or scaled back and hotel operators who once counted on cabin crew and pilots staying overnight said they had taken a sizeable hit.

Mandala Hospitality Group owns the Mantra Mackay hotel in north Queensland, and spokesman Ryan Shaw said Virgin Australia staff on layover made up a significant part of their business.

“We often have 10 or 15 Virgin [staff] every day … and certainly [we’re] pretty concerned that we won’t be getting it back,” Shaw said.

“[Losing Virgin] will definitely put our hotel in jeopardy, even if it hadn’t been for the coronavirus impacts separately to that.”

The company was about to renovate before the pandemic slashed their revenue by 90 per cent.

To make matters worse, Shaw said the company was out of pocket $100,000 from the airline.

“Like most large companies, they [Virgin Australia] pay very late and we were still on the hook for rooms from February and March,” Shaw said.

“There are thousands of companies across Australia who are suppliers to Virgin — they’re all unsecured creditors and they’ll get nothing.”

Regional recovery in doubt under a one-airline system

Travel agents worry about a significant domestic fare-hike if Virgin Australia was to collapse.

Cairns-based travel agent Mercedes Gonzalez said she could recall Sydney-to-Cairns return airfares costing upwards of $900 following Ansett’s demise.

A Brisbane newspaper in late 2001 referenced Brisbane-to-Cairns return flights from more than $950.

“I have no doubt that if we go back to the one-airline monopoly, there will be one price in the sky,” Gonzalez said.

“I love Qantas just like every other Australian, but Virgin has given us the opportunity for every single Australian to fly.”

She was also concerned international tourists and business travellers might no longer come to the region if the airline collapsed or routes were stopped.

“We are so separated from the rest of the world — we don’t have the international flight coverage — now more than ever we need that connection,” she said.

It is a concern shared by Tourism Tropical North Queensland (TTNQ) chief executive officer Mark Olsen, with about a sixth of overnight visitors arriving in Cairns on Virgin flights.

“Virgin Australia has become an integral part of the Cairns tourism community over the past 19 years,” Mr Olsen said.

“We want to see them here for our recovery from the current crisis.

“We need a strong, competitive and supported aviation sector to drive our recovery.

“As a region, we are facing a long road to recovery and affordable air access is one of the most effective strategies to speed up our recovery.”

‘Severe and potentially long-lasting impacts’

In the past few days, the Queensland Government has clearly flagged how much they value Virgin Australia, by offering $200 million toward any support package that would bail out the airline, on the condition their headquarters remained in Brisbane.

The Federal Government has repeatedly insisted the market should come to Virgin Australia’s rescue and not the taxpayer.

In the meantime, Queensland State Development Minister Cameron Dick said the impact and uncertainty caused by Virgin’s administration would continue for “many months”.

“[It] will have severe and potentially long-lasting impacts on the Queensland economy,” he said.

“We saw it following the collapse of Ansett and we will see that same devastation on our state’s tourism industry, particularly through the increased cost and decreased frequency of flights to regional areas.

“We have been very clear all along that Virgin is a national airline in the middle of a national crisis, and there needs to be a national response, led by the Morrison Federal Government.”

– ABC / Tim Swanston, Tim Shepherd and Marian Faa

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