Government to revise Qantas Sale Act, axe foreign ownership limits

By David Flynn , March 4 2014
Government to revise Qantas Sale Act, axe foreign ownership limits

The Federal Government will revise the Qantas Sale Act and lift all restrictions on foreign ownership of Qantas, paving the way for increased overseas investment and potentially 100% foreign ownership of the Flying Kangaroo.

"We will seek to repeal part three of the Qantas Sale Act in its entirety" said Prime Minister Toby Abbott this evening, calling out that part of the act which covers foreign ownership of the airline as well as anchoring most maintenance in Australia.

Read: The Qantas Sale Act explained

The government aims to introduce the legislation by the end of this week, although it's unlikely to pass the Senate, with the Labor Party already ruling out support for the government's amendment and earlier today describing removal of the 49% foreign ownership cap as "a red line."

However, Labor has indicated willingness to abolish the current 25% limit on a single foreign investor and 35% cap on total stakeholding by all foreign airlines.

The legislation would likely be trotted out again when the new senate takes over mid-year, but the government would still need to take its chances with a clutch of new and unaligned senators including the Palmer United Party, Liberal Democratic Party, Family First and Australian Motoring Enthusiast Party.

The picture has been further muddied by last months' High Court declaration that Western Australia's 2013 Senate poll was invalid due to the loss of 1,370 ballot papers, with a new election for six senators to be held on April 5. 

Qantas split into domestic, international

Should the legislation pass, however, Qantas would be forced to split its domestic and international arms into two effectively separate companies, rather than the current operational division.

This would be necessary because Australia's Air Navigation Act requires that an international airline be majority Australian-owned, although it places no such restrictions on domestic airlines which can be entirely foreign-owned.

Under that arrangement Qantas Domestic would be able to take up to 100% foreign ownership while Qantas International would be capped at 49%.

The new structure would ironically mimic that of Virgin Australia – a structure which Qantas CEO Alan Joyce once labelled a "sham" and has repeatedly said provided the challenger with an unfair advantage due to investment from Virgin partners Air New Zealand, Etihad and Singapore Airlines, which together hold approximately 65% of Virgin Australia Holdings.

No debt guarantee

However, the government rejected providing Qantas with a debt guarantee.

"We certainly don't believe in any normal circumstances that government should be playing favourites between competing private businesses" Abbott said, adding that Virgin Australia, like Qantas, employed Australians and operated in Australia.

"We want to ensure that both these fine airlines are operating under the same rules” he said.

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David

David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.

Qantas - Qantas Frequent Flyer

19 Nov 2011

Total posts 246

It'd be really funny if domestic airline was majority foreign owned. 

Picture Darwin Airline was renamed to Etihad Regional where a European carrier got name changed to Etihad's brand.

If QF domestic got owned by Emirates, our domestic carrier could become Emirates Regional (just saying...) rather than keeping the name Qantas. What would the impact of QF membership to Oneworld?

01 Feb 2012

Total posts 370

No chance. Due to brand value, Emirates would keep Qantas name. 

Don't see any issues. The national airline of Switzerland and Austria is owned by the German one; Iberia is controlled by the British; KLM is controlled by the French. We are but a small nation - we'll be better off if we recognise it.

01 Feb 2012

Total posts 370

Given PUP are against this, any chance this will actually pass, even after July?

If it does, it will be really interesting from an M&A perspective. Of course, Emirates says they have no interest, and oneworld airlines aren't that healthy themselves. However, the QF domestic network is of value to Emirates and oneworld, and they will not want any competitors buying QF and pushing them out. At this price, QF would be a great acquisition for anyone, I imagine Etihad or SQ would be interested (after selling out of Virgin). That would push either Emirates or CX or Qatar into action. 

07 Oct 2012

Total posts 1256

Not sure about PUP, but  I doubt that EY, SQ or CX have interest in QF. If it happens, China Southern or perhaps a combo of IAG/AA (if Qantas is that important to OW). Qatar is possible. The threat of Qatar buying QF could push EK into making a bid.... but who knows? It will be interesting if it passes (and thats a big if).

Qantas - Qantas Frequent Flyer

17 Aug 2012

Total posts 2223

IAG/AA is a possibility, given that without QF, OW loses their critical southern TPAC bridge.

01 Feb 2012

Total posts 370

Don't forget that the former AA board and management are all gone now, they're basically US airways with AA branding. US airlines are also not in the habit of acquiring overseas since they only think US-centrically.

From a synergy perspective, why IAG? It has next to no synergy with QF, almost no route overlap. I am not sure they are financially stable enough themselves to do it either. 

I'm afraid to say it but the sooner a likely image of a Qantas suitor is determined the more likely the modification of the QSA will happen.

As long as the bogeyman of a Gulf or Chinese (mainland) carrier is in the picture, a political consensus will not materialise.

Fact of the matter is, in the eyes of the public, there is a list of appropriate airlines for Qantas to be wed to and there is also a No-Go list.

To modify the QSA in such an open ended way will do nothing to eradicate the fear.

01 Feb 2012

Total posts 370

The funny thing about the media conference yesterday was that the PM was discussing how this would free Qantas, without actually saying how this would help. As though repealing Part 3 of the QSA would magically cut costs and increase profits. It doesn't actually help unless it is actually purchased by a foreign airline...

I agree with you that if this passed in July and the next day a chinese airline offered $3 p.s. for 100% of Qantas, Hockey would then block it on national security grounds.. which then makes the entire argument on how this helps Qantas compete utterly ridiculous. 

The funniest part though was when he said Bill Shorten was all about opposing and had no positive ideas... oh the irony. IMHO this was all about politics and the government deliberately creating a divide with Labor. Hockey was keen on giving a debt guarantee, but so was Shorten. This is a way for the government to do nothing and blame everything on Labor. At the end of the day nothing will happen. 

Singapore Airlines - KrisFlyer

26 Jul 2012

Total posts 35

It is capacity war that has got our airlines into this mess; Have we not learnt anything from the '90's and 'oo's!!!  QF particularly have themselves to blame; They hate having competition!! Now they have the nerve to ask for tax payer dollars and concessions. I do agree wtih the current Fed Govt that dispossing of sect 3 of the QF Sales Act would make things more fair particularly for the longevity for QF, but QF have to move with modern times and free up work force contitions, steamline operations and fleet, disposing quickly of old ineffiecient aircraft. Hogan was so right in saying in The Australian recently that all airlines should be making handsome profits in Australia, and stop this naval gazing!!


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