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Australian PM to try to Repeal Parts of Qantas Sale Act

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Australian PM to try to Repeal Parts of Qantas Sale Act

Australian PM to try to Repeal Parts of Qantas Sale Act
March 03
19:37 2014

MIAMI — Australian prime minister Tony Abbott announced that the government will attempt to repeal key provisions of the Qantas Sale Act in a bid to prop up the nations flailing flag carrier, Qantas.

If successful, the changes could lead to substantially increased foreign ownership of the Aussie carrier as well as a split between the domestic and international arms.

The carrier announced massive losses last week, and subsequently shared plans to cut $2 billion in expenses in the coming years, including axing 5,000 full-time jobs. The airline has since been seeking government intervention in the form of debt relief and changes to the Act.

According to reports from the region, cabinet level talks regarding government debt relief and lines of credit fell through on Monday. Following the setbacks, Abott said the government would pursue amending the act. The legislation could be introduced into Parliament as early as this week.

Should the legislation pass, it would lift existing restrictions on foreign ownership of the airline, thus opening the carrier up to significant foreign investment. The carrier’s arch-rival Virgin Australia is not subject to the law, and is thus supported by substantial foreign money, including Singapore Airlines, Air New Zealand, and Etihad.

It would also force the carrier to split into two separate companies: domestic and international. The split is crucial as the Australian Air Navigation Act requires an international airline to be majority Australian-owned in order to maintain landing rights, thus capping foreign ownership stakes at 49%. There are no restrictions, however, on Australian domestic airlines being foreign owned.

Repeal of the act would place Qantas on more equal footing with Virgin, but would also increase the odds of Qantas jobs moving out of Australia.

As a result the Labor and Greens parties have already vowed to fight the bill, setting up what could be a protracted fight and an uncertain future for the airline. They claim the move would likely see massive Australian job losses and a gutting of what makes the carrier uniquely Australian. As a result, sources say that it is unlikely to pass the Senate.

Introduced in 1992, the act privatized the airline and limited foreign ownership of Qantas to 49 percent in sum total. Additionally, no single foreign entity can hold more than 25 percent of the airline’s total shares, while foreign airlines collectively can only hold up to 35 percent of the company shares combined.

In trouble


Late last week Qantas reported epic-level losses of $226 million US in the second half of 2013, the largest and most recent in a string of losses. CEO Alan Joyce subsequently announced that the company needs to find $2 billion in savings.

Subsequently everything from 747s to the airplanes’ mechancis have found themselves in the cross hairs. Joyce has rolled out plans to cut 5,000 full time jobs, sell off six 747s, all 737-400s and 767s, and defer any new wide-body deliveries.

The company has been facing pressure from a strong Australian dollar, increased international competition, high fuel costs, and an ongoing price-war at home with Virgin.

 

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