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Australian premier backs lifting Qantas foreign ownership limit

Qantas Airways Limited, Australia’s largest carrier, could get government support to remove restrictions on foreign ownership of its shares, the Australian Financial Review reported citing Prime Minister Tony Abbott.

Australian parliament may consider changes to legislation to help Qantas compete with Virgin Australia, local media reported citing prime Minister Tony Abbott. — AFP

Parliament may consider changes to legislation to help the company compete with Virgin Australia Holdings Limited, Abbott told the newspaper. Existing laws limit the level of foreign ownership in Qantas to 49 per cent, restrictions that don’t apply to its rival.

Qantas is cutting 1,000 jobs and seeking A$2 billion ($1.8 billion) of savings after forecasting a record first-half loss on rising fuel costs and declining ticket prices as it competes for passengers. Virgin, founded by billionaire Richard Branson, is more than 60 per cent owned by Air New Zealand Limited, Singapore Airlines Limited and Etihad Airways.

“What Qantas wants is to be unshackled,” Abbott said, according to the newspaper.

“Now I don’t think that’s an unreasonable request on their part, but that’s a matter for the Parliament as well as the government.”

Standard & Poor’s downgraded Qantas to junk after it forecast the loss, citing competition from Virgin and its “well-capitalised shareholders.” Qantas is rated BB+ by S&P, one level below investment grade.

Sydney-based Qantas flagged a loss before tax and one-time items of A$250 million to A$300 million in the six months ending on December 31. “Qantas appreciates the acknowledgment that we’re playing on an uneven field,” Qantas spokesman Luke Enright said on Saturday in a statement sent by SMS. “We’re in ongoing dialog with the government about how it could be leveled.”

The airline is “certainly not looking for a handout from taxpayers,” Enright said.

The 1992 Qantas Sale Act, passed before the government sold the carrier to investors in 1995, limits total ownership by foreign airlines to 35 per cent and the largest stake permitted to any single foreign investor is 25 per cent.

The laws also place restrictions on the company’s name, where it locates operations and the proportion of foreign board members.

In promising to support a A$350 million capital raising by Virgin Australia, its airline shareholders are “pumping money in to continue a loss-making business” Qantas chief executive officer Alan told reporters on a December 5 conference call.

Virgin, which started as a budget carrier before adding business class seats in 2011, has been targeting corporate customers, ending almost a decade of near monopoly on full- service domestic flights for Qantas.

Moody’s Investors Service on December 5 put Qantas’s Baa3 rating, its lowest investment grade, on review for a possible downgrade. An internal review looking at divestments, and a proposed sale-and-leaseback arrangement for its fleet, have heightened the uncertainty, according to Westpac Banking Corporation.