Foreign ownership of Qantas is a smokescreen

With the Abbott government looking to introduce legislation to repeal part three of the Qantas Sale Act (QSA) despite opposition from Labor and the Greens, it's worth cutting through some of the misinformation to examine what the QSA does and why some are fighting to keep it.
 
Passed in 1992, the purpose of the QSA was to enable the privatisation of Qantas, with Qantas shares being sold by the government over the next four years.
 
Most of the QSA deals with the mechanics of privatisation or with ensuring the continuation of workers' entitlements. It does not, as some have claimed, impose explicit regional service obligations on Qantas.
 
However, part three of the QSA does impose restrictions on the ongoing operation of Qantas: the key provision is section seven, which requires Qantas to include in its articles of association restrictions on foreign ownership and outsourcing.
 
Much of the rhetoric has been on the issue of foreign ownership, which is limited to 25% of the company for an individual and 49% in total for all foreign ownership (while foreign airlines in total are limited to 35%). The issue of foreign ownership is largely a smokescreen for union concerns. Many Australian icons (like Arnotts or Vegemite) are foreign owned and this has scarcely changed our relationship with them.
 
Moreover, the idea that Qantas will suddenly become foreign-owned ignores other foreign ownership restrictions. International carriers are limited under the Air Navigation Act to 49% foreign shareholders, while any foreign takeover of Qantas would also likely have to be approved by the Foreign Investment Review Board.
 
Provisions in the QSA of greater impact are those that tie the international operations of Qantas to Australia. Qantas cannot operate an international airline under a different name. Its head office and, most importantly, the principal operation centre for international air services (maintenance, catering and other facilities) must remain in Australia.
 
For a heavily unionised business such as Qantas, which negotiates with 14 different unions, this requirement effectively entrenches union jobs. Hence the staunch opposition to repealing part three of the QSA by those with union affiliations.
 
Air services are changing. New aircraft require substantially less maintenance than their older versions. High-quality, low-cost maintenance providers like ANZES in New Zealand and SIAEC in Singapore are proliferating in our region. Price and route competition is increasingly fierce.
 
With the QSA requiring the majority of Qantas' heavy maintenance, catering, training and administration to be conducted in Australia, Qantas is locked into an uncompetitive cost structure and is losing market share as a result.
 
As Qantas struggles to compete both with full service airlines with lower wages and greater volumes, and the proliferation of low cost carriers in Asia, handcuffing Qantas to Australia is likely to cost many more jobs than it would save.

Simon Cowan is a Research Fellow at The Centre for Independent Studies.