Qantas Airways Limited (ASX: QAN) shares are up almost 5% in morning trade, despite news the airline is under investigation by the Australian Securities and Investments Commission (ASIC) following statements made about its rival Virgin Australia Holdings Ltd (ASX: VAH).
The regulator is investigating whether Qantas breached the law by making false or misleading statements about its competitor.
ASIC investigation
ASIC confirmed to The Age that it had been in contact with Virgin to make enquiries about the allegations, while Virgin confirmed it had provided the regulator with the information requested. The investigation comes amid allegations that Qantas spread rumours to the media that Virgin was running out of cash and had appointed administrators.
Virgin yesterday confirmed that it was seeking a $1.4 billion government bail out. The airline has cut domestic capacity by 90% with 125 aircrafts temporarily grounded. The airline stood down 80% of its workforce last week after previously suspending international flights until 14 June. Ratings agencies S&P and Fitch downgraded the airline last week and placed its ratings watch on negative.
Qantas denies claims
Qantas has denied spreading rumours about Virgin, telling The Age, "these claims are categorically wrong". But tensions between the airlines have been escalating, with Qantas coming out against any government rescue of its competitor. As reported by ABC News, Qantas CEO Alan Joyce has said federal government assistance should not be offered to businesses that are "badly managed". Joyce said it would be a matter of "survival of the fittest" in the airline sector.
According to The Age article, ASIC is considering whether Qantas breached sections of the Corporations Act which forbid making false or misleading statements that are likely to induce others to trade in shares or influence a company's share price. Penalties for breaches of these sections include civil penalties and even jail time for individuals.
Qantas shares hit a low of $2.14 on 19 March but have since moved up by 58% and are currently trading at $3.39. Virgin shares hit a low of 6 cents on 19 March and have since recovered 56% to 9.4 cents at the time of writing.
Cooperation urged
Chairman of the Australian Competition and Consumer Commission Rod Sims has requested restraint and cooperation between the airlines, telling ABC News, "we really need companies working together during this crisis and talking about survival of the fittest could be seen as quite unhelpful."
Virgin has also hit back at Qantas, saying they were not playing a game of 'Survivor'. CEO Paul Scurrah told The Age, "[t]his is a global pandemic creating unprecedented challenges for our industry."
