Qantas fears Etihad rise could see it 'go under'

Australia's Qantas has warned the government it could "go under" if Abu Dhabi-based Etihad Airways is allowed a greater stake in rival carrier Virgin Australia, a report said Friday. Its executives have been lobbying the government, saying that if Etihad doubled its stake in Virgin Australia it could hurt Qantas by undercutting its domestic fares, The Sydney Morning Herald said. Etihad has built its holding in Virgin over recent weeks to 3.96 percent and has said it wants to boost it to 10 percent. The paper said Qantas executives were pushing the government to limit Etihad's plans, or reduce legal restrictions on Qantas under the Qantas Sale Act, saying otherwise: "We could go under." A briefing paper cited by the Herald said Qantas feared a Virgin-Etihad partnership would "pick the eyes" out of the most lucrative domestic routes, while ignoring the less profitable services that Qantas flies. "Virgin/Etihad will be able to flood the market with capacity until its competition is forced to significantly reduce its own operations or worse," the paper says, according to the Herald. Qantas said chief executive Alan Joyce and other senior executives were in Canberra this week to speak to lawmakers but would not confirm the report. "The nature of those discussions is private," a spokesman told AFP. State-backed Etihad has been on a buying spree, increasing its stake in not just Virgin Australia but also upping its position in Air Berlin to almost 30 percent. It also owns 40 percent of Air Seychelles. Joyce has long complained that the Qantas Sale Act -- which dictates that the airline remain majority Australian-owned and limits foreign investment -- creates an uneven playing field against state-backed foreign carriers. Qantas -- which was once a state-owned carrier but was fully privatised in 1995 -- is losing money on its international routes and believes it is being undercut by state-owned operations such as Etihad and Singapore Airlines. Shares in the airline plunged to record lows this month after Qantas, hit by high fuel bills and industrial unrest that saw its fleet grounded for almost two days last year, warned of a huge profit slump. The "Flying Kangaroo" expects underlying profit before tax of Aus$50-100 million (US$50-100 million) this year, compared with Aus$552 million in the previous year, due to soaring fuel costs and worsening global conditions.