CANBERRA, Australia – The Australian government decided on Monday to relax foreign ownership restrictions on Qantas Airways after the national carrier posted a record half-year loss.
Prime Minister Tony Abbott said his Cabinet ministers had agreed to repeal legislation that prevents foreign airlines from holding more than 35 per cent of the airline and any single foreign investor from holding more than a 25 per cent stake.
The Qantas Sale Act, which became law in 1992 as the state-owned airline was about to be privatized, also mandates 51 per cent Australian ownership.
The government could struggle to pass the changes through a hostile Senate, where opposition parties have voiced objections to any reforms that could send Qantas jobs overseas.
Qantas last week posted a first-half loss of 235 million Australian dollars ($211 million) amid tougher competition and said it would cut 5,000 jobs.
Abbott said the Cabinet on Monday ruled out guaranteeing a loan for Qantas. The government had earlier discussed the possibility with the airline.
“I have enormous faith in the ability of Qantas to compete and to flourish, but I think it is best placed to compete and to flourish if it is unshackled and un-propped up by government,” Abbott told reporters.
While part of the Qantas Sales Act would be repealed, foreign ownership of the airline could still be curbed by other legislation.
The Air Aviation Act states Australian-based international carriers have to be 51 per cent Australian-owned with headquarters in Australia. Abbott suggested Qantas could avoid this restriction by splitting its international and domestic businesses.
A foreign takeover bid for Qantas would also be subjected to a national interest test by the Foreign Investment Review Board.
Qantas’ credit rating was downgraded from investment grade to junk in December when it warned of a looming interim loss of up to AU$300 million and 1,000 job cuts.
Qantas chief executive Alan Joyce, who has argued for an Australian government debt guarantee for Qantas, complains that its main competitor, Virgin Australia, has cheaper access to capital because of its state owners. Virgin Australia is 64 per cent owned by three state-owned carriers: Air New Zealand, Etihad Airways and Singapore Airlines.
The opposition Labor and Greens parties, which hold a Senate majority, reacted to the news by repeating their opposition to foreign ownership of Qantas.
Labor aviation spokesman Anthony Albanese said his party would be prepared to consider changes to the 35 per cent cap on foreign airline ownership of Qantas and the 25 per cent cap for any individual foreign investor.
He said splitting Qantas into separate international and domestic carriers was against the national interest.
“We support Qantas remaining an Australian airline,” Albanese said, adding that requires that majority ownership be based in Australia, as well as the airline’s headquarters, board of directors and maintenance staff.