Qantas seeks foreign ownership rule change

27 November 2013
Last updated at 22:01 ET

Qantas has taken various steps to restructure its loss- making international operations

Australian airline Qantas has backed a suggestion by Treasurer Joe Hockey that rules restricting foreign investment in the carrier should be changed.

Current rules limit total foreign holding of Qantas to 49%, with foreign airlines allowed to own just 35%.

Qantas has claimed the rules have hurt its growth, not least because its arch-rival Virgin has benefited from increased foreign investment.

Qantas has struggled recently amid rising competition and slowing demand.

“What we have seen in Canberra is the politicians listening to our arguments, the politicians saying there is an unlevel playing field here,” said Alan Joyce, chief executive of Qantas.

Shares of Qantas rose as much as 5% in early trading in Sydney as investors hoped a change in rules may help the company.

Tough times

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The process would be prolonged, during which time Virgin Australia would be free to continue its anti-competitive strategy aimed at crippling Qantas”

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Alan Joyce
Qantas

The ownership rules were incorporated in the Qantas Sale Act ahead of the airline’s privatisation in the 1990s.

However, since then the dynamics of the airline industry have changed significantly.

Even though Qantas continues to dominate the Australian market, it has struggled in the international market. Its international division has been making a loss for some time, holding back its overall profitability.

At the same time, profits at its domestic operations also fell in the financial year to 30 June 2013 – down 21% from a year ago to A$365m ($333m; £205m).

The airline is facing increased competition, not least from rival Virgin, which has attracted investment from foreign carriers Etihad, Singapore Airlines and Air New Zealand.

‘Immediate action’

For its part, Qantas has entered into a partnership with Emirates, with the two collaborating on pricing, sales and flight scheduling. The airline has said the partnership has started to help turn around its fortunes.

Mr Joyce called upon authorities to take “urgent, immediate action” to help sustain its growth further.

However, in a note sent to Qantas employees on Thursday, My Joyce said the government needed to do more than just change the Qantas Sale Act.

He said this was because “we don’t think it is realistically achievable” to change the act in the current parliament.

“And the process would be prolonged, during which time Virgin Australia would be free to continue its anti-competitive strategy aimed at crippling Qantas,” he added.

“We simply do not have the time.”

When contacted by the BBC, a spokesman for Qantas said the airline was discussing various options with the government to “level the playing field”.

Qantas seeks foreign ownership rule change