Qantas ownership relaxed
The government announces its intention to allow greater foreign investment in Qantas, raising the possibility the airline may split into domestic and international carriers.PT2M16S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-34188 620 349 March 4, 2014
Matt O'Sullivan deciphers the latest developments in the Qantas saga, with the government announcing it will change the rules to allow that restricted foreign ownership of the airline rather than offer to guarantee its debts.
What does changing the Qantas Sale Act actually mean?
Two pieces of federal legislation apply to Qantas: the Qantas Sale Act, 1992 and the Air Navigation Act, 1920.
Australian airlines have to abide by the Air Navigation Act, which requires them to be at least 51 per cent locally owned, in order to gain access to air routes into and out of the country.
This is not changing.
But the Qantas Sale Act, introduced when the airline was first privatised, imposed additional restrictions on Qantas.
These included capping any foreign airline's stake in Qantas at 35 per cent, and limiting the stake of any single foreign investor to 25 per cent.
It's these provisions of the Qantas Sale Act that the government wants to get rid of.
What will these changes mean for airfares?
While the bitter battle between Qantas and Virgin Australia is taking a heavy toll on the two airline's finances and in turn their shareholders, the biggest beneficiary remains the flying public who are lapping up low fares. That intense competition has also extended to the contest between Qantas' budget offshoot, Jetstar, and Tigerair Australia, in which Virgin has a majority stake.
The removal of the Qantas Sale Act will not stop this battle. If anything, it will give Qantas the ability to step up the fight as some obstacles to its ability to continue the fight are removed.
Will Australian crew still be flying Qantas planes?
While Qantas will be freed to outsource and offshore more jobs, it is important to remember that Qantas is a consumer business. If travellers are happy, Qantas' bottom-line benefits. It means that Qantas' ability to hire foreigners to fly its aircraft are not so much limited by law but the demands of passengers. Besides, Qantas will still have to abide by Australian labour laws. In the case of cabin crew, Qantas and Jetstar already have some foreign flight attendants in overseas cities which work on its planes.
What does it mean for Jetstar?
Jetstar is not bound by the Qantas Sale Act. Qantas is already able to sell off or float its budget offshoot but analysts believe this is unlikely because it remains a relatively new airline.
My frequent flyer points what happens there?
No changes to Qantas' frequent-flyer scheme as a result of changes to the act. It is important to remember that the loyalty scheme is a key driver of Qantas' profits, and it makes major changes which agitate its members at its peril.
Where is Virgin in all this? Isn't it also Australian?
Virgin has reshaped itself as an upmarket competitor to Qantas over the last three years. Over that time, three foreign airlines – Etihad, Air New Zealand and Singapore Airlines – have built a combined stake in Virgin of 67 per cent. Despite the foreign investment, the airline is able to deem itself a designated Australian airline – and thus benefit from access to international air routes into and out of Australia – by abiding by the rules in the Air Navigation Act. It has done this by setting up a separate company for its international flying business, which adheres to the requirements for it to be majority Australian owned.
I'm a Qantas shareholder what happens next?
The airline's future rests on management's ability to deliver on its attempt to strip $2 billion in costs out of the business over the next three years without significantly damaging its products. Qantas chief executive Alan Joyce has repeatedly made clear that the Qantas Sale Act is not integral to it changing the airline for the better