Australia has officially approved Qatar Airways' acquisition of a 25 percent stake in Virgin Australia from US private equity firm Bain Capital, a move set to increase competition in the Australian aviation sector, historically dominated by the national carrier, Qantas.

The approval was announced on Thursday, with Treasurer Jim Chalmers highlighting that the decision comes after extensive discussions with industry stakeholders, unions, and others involved in the sector.

Qatar Airways had proposed the minority stake purchase in October, following earlier requests to expand its flight operations to key Australian cities such as Sydney, Melbourne, Brisbane, and Perth which were declined by the federal government in 2023. Chalmers noted that the deal aligns with recommendations from the Foreign Investment Review Board and is considered to be in the national interest, subject to enforceable conditions that mandate Australian representation on Virgin's board and protection of customer data.

The Treasurer also has the authority to revoke foreign investments if they are perceived as a threat to national security.

Virgin Australia’s CEO, Jayne Hrdlicka, expressed optimism regarding the deal, stating it would enable the airline to grow and enhance its competitive stance in the domestic market while advancing its financial objectives.

In the context of the latest developments, Qantas reported an 11 percent increase in its first-half profit, citing strong demand across its services and announcing a special dividend, the first in over twenty years.

Qantas CEO Vanessa Hudson commented on the government's approval, indicating that the company remains welcoming of competition and was not opposed to the outcome of this agreement.

According to information from Australia's competition regulator, Qantas and its budget airline subsidiary Jetstar together control approximately 65 percent of the domestic aviation market, with Virgin Australia holding a 35 percent share.

The competition watchdog recently endorsed the partnership between Virgin Australia and Qatar Airways, which is expected to introduce up to 28 new weekly return flights between Doha and major Australian cities.

Virgin Australia also announced plans for its long-haul services to Doha to begin operating in June, using aircraft leased from Qatar Airways, enhancing travel options for passengers heading to Europe, Africa, and the Middle East.

Currently, Qantas has an existing international partnership with Emirates, while Virgin Australia maintains a code-sharing agreement with Etihad Airways, which is set to expire on June 1. Bain Capital continues to control the majority of shares in Virgin Australia, which had previously aimed for an initial public offering valued at 1 billion Australian dollars (approximately 630 million USD) before postponing its plans.