Troubled Qantas on standby

MARK KENNY AND JAMES MASSOLA
Last updated 09:59 05/03/2014

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Qantas faces the possibility of years in business limbo whether or not Australian prime minister Tony Abbott succeeds in an unlikely move to scrap the 49 per cent foreign ownership cap.

The government has revealed it has no ''plan B'' and is concentrating its efforts exclusively on repealing the foreign ownership restrictions, despite an obvious road-block in both the existing Labor-Greens controlled Senate and the new chamber to sit from July.

The flying kangaroo is now at the centre of a worsening political stalemate, and also faces serious demands from unions over already announced plans to cut 5000 jobs in the next 18 months. Chief executive Alan Joyce is due to sit down with union leaders on Wednesday.

In Parliament, Abbott tried to lay Qantas' troubles at the feet of Labor and the rules that he said had given Virgin the upper hand.

''I'm all in favour of Virgin, I think they're a fine airline,'' he said. ''But as long as the Opposition Leader persists in his current position, he is giving Virgin a better deal than Qantas. Why would any Australian want to see the big flying kangaroo disadvantaged?''

With Qantas' preferred debt guarantee no longer on the table after Monday night's cabinet meeting, the airline is examining more dramatic internal measures to address deepening competitiveness, capital raising and debt servicing challenges.

In the wake of the government's change of heart, the opposition and minor parties in the Senate have hardened their resolve to block any changes to the Qantas Sale Act. They say the changes would send thousands of maintenance jobs overseas and see the airline fall under the control of sovereign-backed foreign airlines.

The airline also faces fresh resistance from staff as unions prepare to step up pressure for answers on the locations for job cuts.

A private letter obtained by Fairfax Media from ACTU secretary Dave Oliver to Joyce asks for details on the job losses, seeks discussion on alternatives to job cuts and asks for details as to how the 5000 figure was arrived at.

The airline's management kept its own counsel as Transport Minister Warren Truss admitted the government was fully committed to the legislative change despite the almost certain failure in the Senate.

Admitting the Qantas request for a standby debt facility had been considered by cabinet, Abbott repeated the government's argument that the best thing to do for the airline was to unburden it from the carbon tax and unshackle it from the foreign ownership limits.

The opposition slammed the government's approach, warning that to take advantage of foreign investment, Qantas would need to split into two companies - international and domestic - which would be extremely complex, very expensive, and could take years to organise.

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Opposition Leader Bill Shorten said the challenges the airline would face included the need for two air operating certificates, arguments over which entity owned the debt, which owned the planes, which banks financed the different entities, the need for significant job cuts through forced redundancies and the attraction of a foreign buyer of the domestic company.

- Sydney Morning Herald

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