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The federal government is set to provide Qantas with a debt guarantee, meaning taxpayers will underwrite the airline's push to increase its foreign ownership.
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Qantas preparing to make 'tough decisions'
There are fears up to 5000 jobs could go as the cash strapped airline tries to prove it is serious about saving $2 billion over the next three years.
The plan also increases pressure on the Labor opposition by making the removal of the guarantee conditional upon allowing the airline access to greater foreign capital investment.
The move would make the public liable for Qantas borrowings in the event of default.
It is the first part of a bigger plan to allow majority foreign ownership of the airline.
The Commonwealth debt guarantee would remain for as long as the national carrier remains restricted from being majority foreign-owned by the terms of its previous privatisation.
Fairfax Media understands the government is also willing to consider relaxing stipulations in the act, which require the airline to carry out the majority of repairs and maintenance in Australia.
Qantas is set to announce major half-year losses on Thursday.
The government is bracing for a bad result, aware that it could lead to thousands of job losses in aviation on top of a slew of recent closures in the manufacturing sector.
Transport Minister Warren Truss said the government would now move on the Qantas Sale Act despite opposition in the Senate, which he had earlier acknowledged would make such a move futile.
Mr Truss said the act had distorted the market and inhibited the airline's ability to grow.
''We have indicated an interest in being prepared to seek to legislate to take away the legislative and government-imposed disadvantages that Qantas faces on the domestic market,'' he said.
''We are working on legislation to achieve that.
''The government is philosophically attracted to levelling the playing field.''
His announcement came as Prime Minister Tony Abbott told the party room the government would no longer be the ''ATM of last resort'' for struggling Australian businesses.
Mr Abbott told colleagues it took courage for government to knock back requests for assistance from Australian businesses, as it has recently done with SPC Ardmona and Holden, but ''if you say yes, you will have a queue a mile long''.
Any move to change the QSA, which limits Qantas to 49 per cent foreign ownership, foreign airlines to a maximum 35 per cent stake and any single foreign shareholder to a 25 per cent stake, would likely be blocked in the Senate, which is dominated by Labor and the Greens, and the next Senate which will sit from July 1.
Fairfax Media revealed two weeks ago that Treasurer Joe Hockey was prepared to throw a lifeline to Qantas in the form of a government-backed debt guarantee, which would give the airline access to cheaper finance.
In parliament, Mr Abbott said if the opposition was ''fair dinkum'' about wanting to help Qantas, it would back moves to repeal the carbon tax, which had cost the airline $106 million last year.
Qantas refused to confirm reports it would axe 5000 jobs and sell its terminal at Melbourne Airport to show the government it is willing to make tough changes to its business practices in exchange for federal funding. The airline acknowledged it would make ''tough decisions'' to achieve $2 billion in savings over three years.
Mr Hockey said on Tuesday the threat of job cuts was ''very serious'' but had to be dealt with by the airline alone.
''Qantas has to run its own company. It's not for the government to run Qantas,'' he said.
The Qantas Sale Act requires the airline to keep most of its maintenance, catering, flight operations and training facilities for its international services in Australia.
Labor and the Greens have both vowed to oppose the changes, with six Labor MPs speaking against the plan in caucus on Tuesday. One Liberal MP also spoke against the changes, arguing Qantas was already an ''8800-pound gorilla'' and would become a ''Godzilla'' if the changes went through.