Qantas opens up to 49 percent foreign ownership

By David Flynn, July 16 2014

Foreign airlines will be allowed to own as much as 49% of Qantas under imminent changes to the Qantas Sale Act.

The Coalition Government has accepted a proposal by the Labor opposition which scraps the act's current foreign investment limits, under which no single investor in Qantas can hold more than 25% and foreign airlines can hold no more than 35% of Qantas shares in total.

Read: The Qantas Sale Act explained

Total foreign ownership of Qantas will remain capped at 49% so that the airline remains majority Australian owned.

It's hoped the higher foreign ownership limit will spur new investment in the ailing airline, which some analysts believe is facing a record loss exceeding $1 billion for the 2013-2014 financial year when one-off costs of redundancies are factored in.

However, Labor's proposals that two-thirds of the board are Australian citizens and that "maintenance, catering and other operations" would be conducted primarily in Australia will not be passed.

"Constraints on Qantas' ability to compete and engage in the market place Qantas at a disadvantage" said Federal Transport Minister Warren Truss. 

However, Truss said that while the compromise agreement "will go some way to easing restrictive ownership provisions, Qantas will still operate under restrictions that do not apply to any other Australian airline."

"It is important that Qantas be granted greater flexibility and this is the only outcome the Senate will pass at this time."

Prime Minister Tony Abbott remains keen on more substantial changes to the Qantas Sale Act aimed at freeing the airline from all ownership restrictions, having previously said this was necessary "to maximise (the airline's) chances of being able to successfully compete and maximise Australian employment for the long-term."

Renewed attention on foreign ownership of Qantas comes as overseas airlines have boosted their stake in Virgin Australia to almost 80%.

Air New Zealand last month boosted its stake in Virgin Australia to 25.99%, the maximum permitted by the Foreign Investment Review Board.

Singapore Airlines holds 22.4% and Etihad follows at 21.4%, with a further 10% of shares belonging to Sir Richard Branson's Virgin Group.

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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.

undertheradar Banned
undertheradar Banned

28 Oct 2011

Total posts 662

GOOD

04 Nov 2012

Total posts 216

I still thnk EK woud take up a big chunk as they have very deep pockets.

Qantas - Qantas Frequent Flyer

10 Apr 2013

Total posts 388

They have already stated that they are not interested in buying a of Qantas though. 

QFF Gold QC gold

26 Nov 2012

Total posts 56

Airlines rarely admit a desire to acquire another airline unless there is a specific benefit in doing so. For all we know EK have probably worked out a strategy to buy into Qantas and held onto it until they are able to do so.

Virgin Australia - Velocity Rewards

06 Dec 2012

Total posts 168

The thing I find interesting is that with current restrictions at  a max 25% sharehold, nobody(ie a major airline) (I have done no research so I may be incorrect) has a significant chunk of shares in QANTAS. So i am a little perplexed at how changing this to 49% is going to make much difference. Yes, there may be the odd company that wants a more significant share and has held off buying into Qantas, but out of all the airlines there must be a raft of other reasons why they don't already own some shares, it can't just be because of the Qantas Act.

Qantas - Qantas Frequent Flyer

17 Aug 2012

Total posts 2221

Once upon a time, BA held that 25% maximum.

AJW
AJW

16 Nov 2011

Total posts 515

Easy, with the old rules it wasn't worth having even 25% because there wasn't much you could do with that share. As someone posted BA did have 25% at one stage but sold for this reason, the shares were pointless.

At least with 49% someone and hopefully an airline with big pockets can take 49% stake and make changes (with support of 1.01% of other shareholders).

Can someone please explain how "safeguarding Qantas' 51% majority stake is critical for local jobs and the national interest"?

Bear in mind this 51% Australian ownership does not equate to 51% government ownership. Does keeping 51% in the hands of Australian private investors somehow protect jobs and preserves national interest?

Does the government expect the 51% Australian (private) owners to feel guilt and prevent off-shoring or to be the custodian of national interest?

Does the government think Australian domiciled investor act irrationally when owning Qantas shares because the haunting sounds of Peter Allen's I'll still call Australia home will reverberate in their minds and force them not to act rationally like any other investor?

The point here is majority control isn't it? If the single ownership and single foreign airline rules are lifted, what's the point of this 51% Australian ownership rule?

Sorry if this is a stupid question. I just dont understand the rationale.

undertheradar Banned
undertheradar Banned

28 Oct 2011

Total posts 662

because the 51% 'appeases'  all those out there (and politicians) who STILL think its 'unaustralian' for QF to have ANY foreign 'involvement'.. YES, QF has a history...YES QF has a past....DON'T WE ALL... but we all ADAPT to SURVIVE... type 'australian brands with overseas ownership' into your search engine, and you will be amazed at the 'reality' of 'Australian brands' ... I'M SICK OF HEARING THE TERM 'UNAUSTRALIAN', and those who use this term should put their money where their mouths are...and INVEST IN A BUSINESS TO KEEP IT 'AUSTRALIAN'......end of rant...happy monday everyone :-)

ps..this is not a personal attack on TRB..just a response to the posted comments

Oh no not at all! Thank you for chirping me...Glad to know I've not gone completely mad.

You know what would be fantastic? Have Jeremy Paxman sit the politician down and get them to explain the rationale and logic of the 51% ownership.

chriping in rather!

12 Dec 2012

Total posts 938

I don't see why there would need to be an ammended Qantas Sale Act requiring 51% Australian ownership. QFi is required to be at least 51% Australian owned in order to retain access to Australia's air service treaties.

QF wouldn't be able to use Australia's rights to say, 5th freedom routes out of SIN, if it wasn't 51% Australian owned.

That's why VA has that insane ownership chart allowing 80% foreign ownership of VA Holidings (as domestic Australian airlines can be fully foregin owned) while VAi meets the required 51+% Australian ownership (at least on paper).

Qantas - Qantas Frequent Flyer

30 Jun 2014

Total posts 1

Good

but after this Mr Joyce, no more excuses

Qantas - Qantas Frequent Flyer

13 Sep 2011

Total posts 182

No more Mr Joyce would be preferred. 

13 Mar 2014

Total posts 27

How is increased foreign ownership of QANTAS going to fix one of the most crucial issues - their costs? Foreign arlines/foreign owners *may* have access to cheaper capital but isn't it operating costs (i.e. mainly staff conditions) rather than capital costs that are making QANTAS uncompetitive. It's hard to see how a foreign owner is going to have any more ability to change the cost base.

Virgin Australia - Velocity Rewards

21 Aug 2013

Total posts 130

Would be utterly FASCINATING if BA or AA took a 49% stake...

Qantas - Qantas Frequent Flyer

13 Sep 2011

Total posts 182

BA did own a percentage for a while.  IAG, parent of BA and Iberia have stated in the past they are looking to buy more airlines.  QF would be a good fit for them I think. 

Qantas - Qantas Frequent Flyer

08 Sep 2012

Total posts 244

Except that since QF and EK cuddled up, BA and QF are like a newly divorced couple. They hate eachother.

For BA/IAG to be interested, QF and EK would need to end their JSA.

Of course I'm sure AJ and the QF Board had hoped EK would take equity in QF when their tie up was being negotiated. But EK have rightly decided to keep their risk low and just code share with QF. If QF goes belly up, they lose a lot less than if they own part of the corpse.

Or both! That would be bloody amazing! Then drop Emirates like a ton of bricks!

Virgin Australia - Velocity Rewards

21 Aug 2013

Total posts 130

@woganfan I recall that from my days at Ansett when we used to worry quite mightily about QF's power if an when BA ever was able to increase their stake...alas, it never happened

@TheRealBabushka one can only wish and dream - imagine a world where one had the requisite international lounge access on top of domestic lounge access, seamlessly, across all three brands. As well as an upgrading of AA's lounges to at LEAST QC standards. Of course, try getting THAT one past the FIRB and the ACCC...

*sigh*

Qantas - Qantas Frequent Flyer

17 Aug 2012

Total posts 2221

Oh, an AA-BA-QF alliance would be hilariously overpowered if they could get up AA to standard and BA and QF to be consistent.

How they'd sort out the Asian network issue is still somewhat unclear to me, but I'm sure the three carriers would have the synergy to make something work without needing to resort to begging CX and KA.

Get that past the ACCC and we'll talk. Hah.

Qantas - Qantas Frequent Flyer

08 Sep 2012

Total posts 244

Problem is, BA can't offer QF pax one stop to Europe. Qatar could, but they're not interested in cuddling up to Qantas because they're already in bed with BA and BA, like all good ex partners, have told Qatar they can't talk to QF. Plus Qatar and Emirates are competitors so Qatar wouldn't want to talk to QF anyway.

Qantas - Qantas Frequent Flyer

17 Aug 2012

Total posts 2221

True, but there's nothing to say that QF can't leverage oneworld and SkyTeam through SIN to Europe. Just off the top of my head, 'hostile' (i.e. not SQ-aligned) carriers available include AF (CDG), KL (AMS), AY (HEL). A lot of potential was wasted during the era when QF flew to both LHR and FRA via SIN.

Such is life.

AJW
AJW

16 Nov 2011

Total posts 515

When you say BA, you do of course mean IAG I would hope. In which case they have done wonders with BA and IB. Though not sure how cabin crew like BA's "mixed fleet" (read ultra low cost) would go down in Qantas.

Qantas - Qantas Frequent Flyer

02 Jul 2011

Total posts 1380

Fiddling while Rome burns comes to mind.

This is not the Govt help that Qantas needs.

Qantas - Qantas Frequent Flyer

29 Jun 2013

Total posts 367

This is great news for Qantas as any new large investors will give the airline millions of dollars  off cash by way of selling shares .also they will be able to enter into shared purchases of aircraft fuel etc etc if they are another airline  all of which means savings and a better bottom line .thank god common sense has prevailed and Qantas can now complete it's restructure .

Qantas - Qantas Frequent Flyer

02 Jul 2011

Total posts 1380

When people buy shares off another investor, Qantas doesn't get any money.

If they wanted to raise money, they could do that anyway without this change, albeit would look pretty stupid at this low share price, and having only 12-18months ago buying back shares.

I doubt there would be any significant saving on fuel or indeed aircraft purchases, QF is already big enough to negotiate well, and it comes down more to things like timing (eg. QFs big orders after 9/11)

Qantas - Qantas Frequent Flyer

29 Jun 2013

Total posts 367

I'm not sure of the final details but Qantas can release shares and off course it will get the financial  benefit. secondly Qantas is not large by world airline  standards ,and some airlines are government owned and off course they have better buying power ,lower cost structure ,lower interest rates,it all depends on who the buyer is .their is currently no large investor in Qantas ,so Qantas owns most off  shares  and as such can  sell shares  down  to 52 % which must be maintained 

Qantas - Qantas Frequent Flyer

25 Jan 2013

Total posts 246

So does this mean that essentially what cabinet has done is loosen the noose, rather than totally remove it? I agree with a lot of the sentiments here. Qantas is battling against supposedly 30% higher costs than competitors, (both international and domestic,) strange parliamentary regulations and history vs. potential for future innovation.

As a hand-on-heart patriot of the lucky country, I get everyone’s concern regarding Aussie jobs from Aussie companies. But as previous commenter have noted, this red tape does not guarantee off-shoring won’t happen. You don’t keep your job because of some parliamentary rule, you keep it cause you’re awesome at it.

One commentator recently suggested to me that AJ adopt a ‘phoenix strategy’. That is, let the company go whilst planning and building up a successor. Bit controversial for my liking. Is this new raft of changes going to do anything or are we simply shuffling the deck chairs on the titanic?

AJW
AJW

16 Nov 2011

Total posts 515

Your analogy about the noose is right. Though one point of order it wasn't cabinet that made the changes it was parliament, both house of it.


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