Qantas Sales Act: Prime Minister Tony Abbott flags lifting airline's foreign ownership rules

Updated

Prime Minister Tony Abbott has given a strong indication the Federal Government is preparing to lift foreign ownership restrictions on Qantas.

The airline's chief executive, Alan Joyce, has been in Canberra this week lobbying the Government for assistance.

Available options include removing 49 per cent foreign ownership restrictions in the Qantas Sale Act or the Government guaranteeing the airline's debt.

Mr Abbott has told Fairfax he would like to have the limit removed.

"Qantas has been shackled by legislative restrictions that were put in place by the Labor Party back in the 1990s," Mr Abbott said.

"I think it would be perfectly appropriate to unshackle Qantas."

Mr Abbott says he wants a "level playing field" for the airline.

"Let's not have Qantas competing with Virgin and others with one hand tied behind its back," he said.

Treasurer Joe Hockey has already indicated the Government has been "dragged kicking and screaming" into helping Qantas.

"In the case of Qantas, there are extraordinary circumstances that necessitate action in the national interest," Mr Hockey told FIVEaa radio in Adelaide.

Opposition Leader Bill Shorten says he wants Qantas to remain in Australian hands.

"Plenty of countries around the world manage to keep their economy afloat and have a majority national-owned airline," Mr Shorten said.

And Greens Senator Lee Rhiannon says her party is also opposed to the Government's move.

"It should maintain a national carrier that remains in national hands and not change the Qantas Sale Act," she said.

Foreign investors may not be interested in Qantas: expert

But there are doubts about whether scrapping the Sale Act or offering a debt guarantee will solve the problems at Qantas.

UTS Business School accounting professor Peter Wells has been keeping a close eye on the airline's finances.

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"The more fundamental problem at Qantas is that it has a lack of profitability; it hasn't paid a dividend for maybe four years now, it has a return on equity which is languishing at around about zero for the last five years that will likely extend into six years.

"So whilst you might relax the Qantas Sale Act and allow increased overseas share ownership, it's not going to be attractive to an overseas investor unless they can see increased profitability in the future."

Professor Wells believes the decline in the airline's share price also indicates investors hold little hope for increased profits.

"The government guarantee is just a Bandaid to an arterial bleed," he said.

"The real issue is that they need to improve their underlying profitability. Staff costs have persistently been in the region of 24, 25 per cent of revenue - this is higher than comparable airlines and that's the killer."

Qantas says labour is its second biggest expense after fuel.

But the airline cannot control fuel prices, so Professor Wells says any potential foreign investor would want to make big staff cuts to lower costs.

Union flags possible campaign over 'national interest'

Despite that threat, the head of the Australian and International Pilots Association, Nathan Safe, believes the Sale Act should be scrapped.

"And if management are smart then they will find a way to bring along staff with them, with these changes, so that we're all working together rather than squabbling amongst each other to make Qantas successful," he said.

Mr Safe says the Pilots Association would be happy to sit down and negotiate on pilot wages with a new foreign investor if the Sale Act was lifted.

"We're always happy to talk with whoever owns or whoever is running the airline," he said.

"That needs to take place not via the media but by structured meetings. There needs to be proper dialogue with the pilots and with managers and that needs to be done in a grown-up and mature way."

Tony Sheldon from the Transport Workers Union says any attempt to "water down" the Sale Act goes against the interests of the Australian economy and the airline's employees.

He says the workforce would be prepared "to campaign to make sure that Australian jobs and Australian national interests are served".

Topics: business-economics-and-finance, air-transport, industry, australia

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