Deputy PM says a domestic aviation network servicing capital cities and major regional centres is ‘critical to Australia’s success’
The Australian government will pay Qantas and Virgin Australia up to $165m to maintain key domestic flight routes over the next two months.
The move means Virgin Australia, which is under intense financial pressure and had grounded its fleet, will resume flying on Friday and continue the routes for at least the next eight weeks.
The federal government said it would underwrite the cost of the two major airlines operating a “minimum domestic network servicing the most critical metropolitan and regional routes”.
These would include all state and territory capital cities and major regional centres including Albury, Alice Springs, Coffs Harbour, Dubbo, Kalgoorlie, Mildura, Port Lincoln, Rockhampton, Tamworth, Townsville and Wagga Wagga.
The deputy prime minister, Michael McCormack, said the government was making up to $165m in extra funding available because a strong domestic aviation network was “critical to Australia’s success” and it was important to maintain connectivity during the crisis.
The new funding comes on top of about $1bn in earlier pledges for the aviation sector, including $298m to keep regional airlines operating.
“As Australians are asked to stay home unless absolutely necessary, we are ensuring secure and affordable access for passengers who need to travel, including our essential workers such as frontline medical personnel and defence personnel, as well as supporting the movement of essential freight such as critical medicine and personal protective equipment,” McCormack said in a statement issued on Thursday evening.
“This investment will also help Australians returning from overseas, who find themselves in a different city after 14 days of mandatory quarantine, complete their journey home safely.”
The government said the underwriting would apply for an initial eight weeks and then be reviewed. McCormack’s statement kept the door open for even more funding, saying the government would monitor the market “and determine if further action is required”.
Virgin Australia said the assistance would enable the airline to reinstate some of its stood down flight, cabin and ground crew, along with other operational team members.
It is understood about 200 Virgin Australia staff will be reinstated to operate the flights, including ground crew, cabin crew and pilots. The airline is planning to operate 64 return services each week.
Virgin Australia will also continue to operate international repatriation flights between Australia and Hong Kong and Australia and Los Angeles for a limited time.
Its bigger rival Qantas, which has been considering closing some flights because they are running at less than a third full, has also been funded under the program.
In a statement, Qantas said the funding would allow it and its budget offshoot Jetstar to increase the number of passenger flights they operated each week from 105 to 164.
Guardian Australia has previously reported Virgin Australia was considering going into administration as it raced against time to get out from under a $4.8bn debt pile.
Amid calls from the federal opposition leader, Anthony Albanese, for the government to rescue the airline, it has hired insolvency and turnaround experts at Deloitte to work on restructure scenarios, Guardian Australia has learned.
Virgin Australia had asked for a $1.4bn loan from the government as part of a proposed broader $5bn airline industry bailout.
During a press conference earlier on Thursday, Scott Morrison declined to be specific when asked whether the government would bail out Virgin Australia.
The prime minister said the government appreciated the value of two competitive, viable airlines in the Australian economy, but repeated his position that any support would be done “on a sector-wide basis”.
Morrison also suggested the airlines were pursuing market-based options and he “would wish those discussions every success”.
Airline sources said the earlier $1bn industry support package did little to help because $700m of it was made up of waivers of fees that were not charged when planes were grounded.