The Qantas Sale Act of 1992 has taken centre stage in the ongoing debate over the airline's future – but exactly what is the Qantas Sale Act, what restrictions does it impose on the airline, and why does Qantas CEO Alan Joyce think it should be changed?
Here's a quick summary of the Qantas Sale Act.
Introduced in 1992, ahead of Qantas being taken out of government ownership and fully privatised, the Qantas Sale Act imposes strict limits on foreign ownership of the airline.
- Any single foreign investor is limited to a 25% stake in Qantas
- Foreign airlines can hold no more than 35% of Qantas shares in total
- Total foreign ownership of Qantas is capped at 49%
For example, if one foreign airline was to take up a 25% stake in Qantas, it would leave only 10% on the plate for a second foreign airline before they hit the 35% ceiling for overseas airlines.
This would also mean that any additional overseas investment in Qantas could not come from any other airline – and regardless of where it came from, it would be limited to 14%, at which point the limit of 49% total foreign ownership would be reached.
The Qantas Sale Act and the 'level playing field'
The core of Qantas' argument against Virgin Australia is that Virgin is not constrained by similar foreign ownership restrictions.
At the time of writing, some 64% of Virgin Australia was held by its three partner airlines alone: Air New Zealand has a 24.5% stake, with Etihad Airways holding 19.9% and Singapore Airlines at 19.8%.
(Add a further 7.4% cornerstone stake held by Sir Richard Branson's Virgin Group and Virgin Australia's total foreign ownership stands at just over 71%.)
Changing the Qantas Sale Act
Qantas is lobbying to overhaul the Qantas Sale Act's cap on foreign investment, but while the Federal Government is seen to be broadly supportive of this, the ability of revised legislation to pass the Senate is uncertain.
Labor and the Greens together hold the numbers to block such legislation in the Senate under its current make-up.
They will lose that majority on July 1 when the new Senators-elect (voted in at the September 2013 Federal Election) take their seats.
This could create the environment for changes to the Qantas Sale Act depending on the position of newly-elected Senators.
But will any airline invest in Qantas?
Despite the fact that foreign airlines can already hold as much as 35% of Qantas under the terms of the Qantas Sale Act, Emirates President & CEO Tim Clark has already ruled out investment in the airline.
"Equity is not on the table” Clark says, while also taking a shot at Gulf competitor and Virgin Australia partner Etihad Airways by admitting that while he “will watch [the Qantas situation] carefully”, Emirates didn't possess Etihad's "bottomless pit of cash."
Qantas downplayed Clark's statement, with a Qantas spokesman telling Australian Business Traveller that "we’ve been clear since day one that our partnership with Emirates isn’t about equity or ownership."
"It’s about network, frequency, lounges, loyalty programs and customer experience."
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