Plans to relax foreign ownership restrictions in a bid to revive struggling Qantas have been outlined by the Australian government.
But it ruled out calls from the airline for a state guarantee to enable it to raise funds more cheaply following the loss of its investment grade credit rating in December.
Qantas last week announced 5,000 jobs were to go following A$252 million half-year losses.
The plunge into the red came amid increased domestic competition by Virgin Australia, which is backed by Etihad Airways, Air New Zealand and Singapore Airlines together with pressure from Gulf and Asian carriers on international routes.
Following a cabinet meeting yesterday where ministers discussed how to help Qantas, Australian prime minister Tony Abbott said he did not believe in “government by cheque book,” the Financial Times reported.
“We certainly don’t believe in any normal circumstances that government should be playing favourites between competing private businesses. We just do not believe that and we do not intend to act that way,” he said.
Instead, Abbott said Canberra would amend legislation that limits the level of foreign capital that Qantas can raise, potentially opening a path for foreign airlines to invest in the carrier.
The Qantas Sale Act limits any single foreign investor in the airline to a 25% stake, total ownership by foreign airlines to 35% and overall foreign investment to 49%.
The law was passed in 1992 to protect the airline from foreign takeover and to recognise its strategic importance.
But the opposition is threatening to block any change of the law.
Qantas said: “If this proposal by the government to change the Qantas Sale Act is not passed, we would expect the government and the parliament to consider alternative measures to balance the unlevel playing field in Australian aviation.”
Abbott said: “Cabinet is not proposing at this time, on the evidence before us, to offer Qantas a debt guarantee or a line of credit.
“I have enormous faith in the ability of Qantas to compete and to flourish but I think it is best placed to compete and to flourish if it is unshackled and un-propped up by government.”