Qantas Welcomes Foreign Investors

16th Jul 2014

Australia's once mighty bird (clue, it's not the emu) has lost its steam. The loss-making state flag carrier is now calling for a rescue team that would bail it out from the trench so deep it hardly can get out on its own.

Good news for Australians and bad news to its major rivals?the state carrier won't go extinct yet, as the government is open to the proposal to ease foreign ownership in the airline to up to 49%. In the current Qantas Sale Act, the Australian government only allows up to 35% ownership by any foreign airlines. A single investor, on the other hand, is only limited up to 25% ownership in Qantas.

With the amended foreign investment law, foreign ownership in the airline will now be capped at 49% so as to retain the majority stakes to Australians.

The airline suffers a record-loss of $1 billion during the 2013-2014 fiscal year if one-off costs of redundancies are taken into account.

The easing of foreign ownership was proposed by the Labor party in an effort to rescue the airline from imminent collapse. However, their other proposals such as the adjunct operations of the airlines be in Australia and that 2/3 of Qantas' board must be comprised of Australian citizens, won't be enacted.

According to the country's Federal Transport Minister, Warren Truss, Qantas will still be subjected to restrictions that are not applied to other Australian airlines despite the easing of restrictive ownership as provided by the new law. He clarified that the airline needs greater flexibility as a national flag carrier.

Prime Minister Tony Abbott, however, has shown its support for more substantial changes to the Qantas Sale Act by removing all sorts of ownership restrictions to the airline to allow it to compete more successfully and provide long-term employment to Australians.

In comparison, local Australian investors own only 20.21% stakes in Virgin Australia, though they're still majority stakeholders. The rest of the stakes are held by three other major airlines, one of which is Air New Zealand who is the biggest foreign investor holding 25.99% stakes. Singapore Airlines and Etihad Airways hold the remaining stakes, at 22.4% and 21.4%, respectively. The remaining 10% is held by the Virgin Group.