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Qantas foreign ownership rules to change

Geoff Easdown  Dec 16, 2009

QANTAS will be free to become the dominant partner in an airline merger under a Federal Government plan to ease the rules on foreign investment.

The Government yesterday foreshadowed an arrangement where foreign airlines will be able to buy as much as 49 per cent of Qantas.

It will also alter rules that stop foreign airlines from joining together and buying more than 35 per cent of the national carrier and single foreign investors from holding a 25 per cent stake.

In future, foreign investment of any sort will be capped at 49 per cent.

But the 260-page document makes clear that Qantas will remain uniquely Australian with a law to ensure the airline's headquarters remain in Australia -- a threat that arose earlier this year when the carrier and British Airways held formal merger talks.

Qantas chief executive Alan Joyce said yesterday the reforms would help the airline "continue to deliver benefits" to a broad sector of the Australian community.

"Qantas has ambitious goals for fleet, product and infrastructure renewal -- and access to capital will be vital to achieving those objectives."

Another of the reforms would allow Qantas to raise capital by selling shares rather than through bank loans.

The policy paper, which outlines more than 130 initiatives, is seen by the Government as an economic and structural blueprint for future industry development.

Referring to future mergers, the paper notes an "increasing trend" toward consolidation and equity alliances among international airlines, triggered in part by a sharp downturn in the global economy.

"There are opportunities for efficient airlines to take advantage of this global rationalisation and the Government believes that Australia's airlines should be in a position to participate in this process," the paper says.

It says removing the 35 per cent and 25 per cent restrictions "will not affect Qantas' operations, nor provide any incentive or disincentive for Qantas to change its percentage of non-Australian-based staff or operations".

"It will, however, enable Qantas to enter into more substantial equity partnerships with foreign airlines than is currently the case."

The paper adds that there is "no immediate intention" to lift the 49 per cent foreign ownership restriction on Australian international airlines.

But the paper leaves the door open for Australian international airlines, other than Qantas, to pursue mergers subject to government approval.

"The government will consider this issue on a case-by-case basis," it says.

Qantas foreign ownership rules to change
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