Explained: Qantas claims Virgin ‘wet leasing’ deal with Qatar Airways will cost jobs
Qantas and other critics are taking aim at a plan that will see Qatar Airways staff operate Virgin’s new international flights as the competition watchdog mulls whether to approve the deal.
The Australian Competition and Consumer Commission (ACCC) has been taking submissions about a corporate tie-up unveiled earlier this year in which Qatar buys 25 per cent of Virgin.
Under the deal Virgin will start offering international long-haul flights, providing consumers with another avenue for travelling into Europe.
But national carrier Qantas, which will face more competition, has come out against a key part of the arrangement known as wet leasing that will see Qatar staff operate Virgin’s overseas flights.
“The proposed wet lease enables Virgin Australia to schedule services crewed entirely with Qatari pilots and crew, whose pay and conditions are substantially less than Australian-based crew,” Qantas said in a submission to the ACCC about the Virgin/Qatar partnership.
“Virgin Australia will have no incentive to develop its own international services using Australian crew on these routes if it can effectively bypass Australia’s laws and regulations. Without a time limit, it will be able to permanently use Qatari labour at the expense of Australian jobs.”
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What is wet leasing?
Wet leasing is a business practice in the aviation industry where an airline leases planes from an owner (in this case Qatar) in addition to at least one crew member (often all crew).
The practice is typically a short-term arrangement that is replaced by dry leasing, where an airline leases aircraft from a third-party owner but provides its own crew and operational staff.
“The wet lease program is a short-term fix to boost travel options for Virgin Australia passengers,” explained Central Queensland University head of aviation professor Doug Drury.
“For Virgin Australia to grow into a profitable national airline they need to have an international presence.
“If they don’t have the capacity to build their own international fleet, then the lease option will work for them.”
Cost for jobs?
Qantas wasn’t the only critic of the Qatar wet leasing proposal, with another anonymous submitter to the ACCC process also raising concerns the arrangement will be bad for local jobs.
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“This arrangement exemplifies the current corporate strategy of outsourcing employment to foreign labour, dismissing the decades of expertise and commitment of Australian aviation professionals,” they said.
“Not only does this arrangement threaten Virgin Australia jobs, but a slippery slope of foreign labour, endangering employment at other carries, including Qantas.”
Qantas previously had a wet lease deal with Finnair, but faced a two-year limit on the use of foreign crews.
Critics are concerned that Virgin has not publicly committed to a deadline yet.
Veteran aviation consultant Neil Hansford said he agreed with Qantas’ position that the wet lease arrangement is bad for local jobs, and that Virgin will face other issues dealing with Qatar.
He said that unlike Qantas’ Finnair partnership, which has been a “straight wet lease”, Qatar is hoping to buy a stake in Virgin and share in the revenue from international flights.
Drury said “time will tell” how the wet lease arrangement plays out, with a key question being whether local workers and the transport union allow it.
“How long will Virgin Australia employees agree to this? They may see this as an opportunity missed,” he said.
“Long-haul pay is better than domestic short-haul pay.”
The Transport Workers Union (TWU) has yet to make its own submission to the ACCC approval process but said in an October press release that local workers should be given first preference for roles staffing international routes.
Virgin Australia was contacted for comment.
