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Mon 3 Mar 2014 12:38 PM

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Australia mulls Qantas foreign ownership plan

Proposals include a separate business to run the domestic business, which would be open to majority foreign ownership

Australia mulls Qantas foreign ownership plan
Qantas CEO Alan Joyce. (Getty Images)

Qantas’s international operations could stay Australian-owned while a separate business running the domestic airline could be opened up to majority foreign ownership, according to an option set to be considered by the Australian government, The Guardian newspaper reported.

Federal Cabinet will also consider the less controversial plan of changing only the requirements of the existing Qantas Sale Act that restrict ownership by a single foreign shareholder (at 25 percent) and a foreign airline (at 35 percent), while leaving the overall 49 percent cap on foreign ownership intact.

Last week, Qantas CEO Alan Joyce took a fresh swipe at domestic competitor Virgin Australia’s majority foreign ownership, which includes Abu Dhabi's Etihad Airways, as the Australian national carrier posted a record $235m half-year loss.

Describing the result as unacceptable, Joyce announced a $2bn cost reduction program through to the end of 2017 with 5,000 jobs to be axed, route cuts and more than 50 aircraft deferred or sold.

“The Australian domestic market has been distorted by current Australian aviation policy, aviation policy, which allows Virgin Australia to be majority-owned by three foreign government-backed airlines and yet retain access to Australian bilateral flying rights,” Joyce said.

“Late last year, these three foreign-airline shareholders invested more than $300m in Virgin Australia at a time when, as Virgin Australia reported to the ASX on 6 February, it was losing money.

“That capital injection has supported continued domestic capacity growth by Virgin Australia despite its growing losses.”

Etihad, which is owned by the Abu Dhabi government, owns 19.9 percent of Virgin Australia, alongside Air New Zealand, which has a 23 percent stake and Singapore Airlines, which owns 19.9 percent.

Removing all foreign ownership restrictions on the domestic airline and paving the way for the break-up of the company would be strenuously opposed by Labor and the Greens, and mining magnate Clive Palmer’s Palmer United party, making it difficult to pass the new Senate that sits from July.

But Australian Prime Minister Tony Abbott said it was an option under consideration and would leave a number of other legislative safeguards in place for the airline, including the Air Navigation Act, which requires Australia-based airlines operating internationally to be majority Australian-owned, and the foreign investment review board, which scrutinises foreign investment proposals and designates aviation as a particularly “sensitive sector”, The Guardian reported.

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