Australian government plans to relax foreign ownership restrictions on Qantas Airways

CANBERRA, Australia – The Australian government is planning to relax foreign ownership restrictions on Qantas Airways as the loss-making flagship carrier battles to slash 2 billion Australian dollars ($1.8 billion) in costs.

Australian newspapers reported Tuesday that Qantas will announce the axing of 5,000 jobs later this week in a bid to return to profit.

Transport Minister Warren Truss said that his government is drafting legislation that would allow Qantas to be majority foreign-owned and remove other restrictions on the airline.

When the state-owned airline was about to be privatized, Australia’s parliament passed the Qantas Sale Act in 1992 which ensured that Qantas would remain majority Australian-owned.

Qantas complains that the law puts it at a disadvantage in raising capital against competitors such as Virgin Australia, in which foreign shareholders Air New Zealand, Etihad Airways and Singapore Airlines have a combined 64 per cent stake.

Foreign airlines can own no more than 35 per cent on Qantas, no single foreign investor can own more than 25 per cent and total foreign ownership is capped at 49 per cent.

Truss said his government was prepared to “to take away the legislative and government-imposed disadvantages that Qantas faces on the domestic market.”

“We are working on legislation to achieve that,” Truss told reporters.

Qantas reported a modest AU$5 million ($4.5 million) annual profit in September last year, following a record AU$245 million ($257 million) loss in the previous year. The airline is expected to report on Thursday a loss of up to AU$300 million for the first six months of the current fiscal year.

Qantas said it would not comment on media speculation on what the airline will announce on Thursday.

“We have said that we will be making some tough decisions in order to achieve AU$2 billion ($1.8 billion) in cost savings over the next three years, which is a consequence of an unprecedented set of market conditions now facing Qantas,” it said in a statement.

The airline said it must reduce costs whether or not the Federal government removes foreign ownership restrictions.

The government could have difficulty persuading Parliament to change ownership rules for Qantas, with the opposition leader Bill Shorten raising concerns about a foreign government potentially gaining control of the national airline.

Prime Minister Tony Abbott said his government accepted “that Qantas do have to compete with a ball and chain provided by the Qantas Sale Act.”

“But, in the end, Qantas do have to get their own house in order,” Abbott said.

Abbott’s government has also discussed with Qantas providing a standby debt facility backed by a government guarantee, for which Qantas would pay a fee. Truss has warned that the terms of such a facility would not be attractive to Qantas.