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Qantas vs Virgin: is additional government support on the way?

With Australia’s airlines in turmoil, we examine some of the industry's latest developments and key talking points from the last month.

A long March

Airline and travel stocks have been particularly hard hit in the last month, as economies grind to a halt and strict government travel restrictions are put in place.

In the last 30 days, Qantas has seen its share price drop close to 40%, Sydney Airport has declined 22%, Virgin Australia has fallen 17% and Flight Centre (which remains in a trading halt) has seen approximately 70% of its value evaporate.

Indeed, as the travel industry faces elevated levels of stress, many are theorising how companies, the government and investors will respond to the still-evolving situation.

For example, Flight Centre is in the process of 'undertaking steps to ensure it retains a robust balance sheet and liquidity position to enable it to manage through the current crisis,’ while Qantas last week announced that it had secured $1.05 billion in new debt funding.

All of this comes after the federal government revealed a $715 million bailout package for Australian airlines on 17 March.

As we previously reported, that ‘multi-million dollar relief package will see domestic and regional aviation security charges and air service charges waived and refunded. In addition to that, aviation fuel excises will also be waived and refunded.’

That support package was back-dated to 1 February.

Qantas and Virgin share prices: egalitarian capitalism

Although the government has not revealed any new assistance packages for Australian airlines, news has begun to circulate that Virgin Australia has requested additional government support – in the form of a $1.4 billion ‘Covid-19 bailout’, according to the ABC.

In response to this, blue-chip carrier Qantas has hit out with its own set on new demands, with the Sydney Morning Herald today reporting that:

‘Qantas has told the Morrison government it expects a $4.2 billion loan to "level the playing field" if it bails out smaller rival Virgin Australia with a $1.4 billion coronavirus rescue package.’

The Qantas CEO has been an outspoken critic of Virgin Australia in recent times, suggesting that poorly managed airlines such as Virgin should not receive government assistance.

At the same time, the Sydney Morning Herald also noted that:

‘Qantas has told the government that it does not want further financial support and is confident of seeing out the crisis on its own, according to a well-placed source with knowledge of discussions between the airline and government.’

Both Qantas and Virgin Australia saw their share prices finish out Tuesday's session higher, with Virgin rising an impressive 18.75%.

How to trade airline stocks

What do you make of these developments: are you bullish or bearish on Australian airlines? Trade accordingly. You can use CFDs to trade Qantas and other airline and travel stocks – LONG or SHORT through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) Qantas, follow these easy steps:

  • Create an IG Trading Account or log in to your existing account
  • Enter ‘QAN’ or ‘Qantas’ in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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