Government could buy 10% of Qantas

Government could buy 10% of Qantas
By admin


The Government is exploring the possibility of buying up to 10% of Qantas in a move designed to shore up the carrier’s credit rating and avoid it being downgraded to “junk” status.

According to reports in the Australian Financial Review, taxpayers could take between 5% and 10% of the airline, which would cost around $260 million.

The prospect of Government intervention emerged as debate continued to rage over the foreign ownership of Virgin Australia and the Qantas Sale Act which limits overseas investment in the flag carrier to 49%.

A repeal or partial relaxation of the Qantas Sale Act is regarded as highly unlikely with Prime Minister Tony Abbott, the Greens and Labor all effectively dismissing the prospect of easing the regulations.

Qantas chief executive Alan Joyce has also acknowledged it was not “realistically achievable”.

Treasurer Joe Hockey said that given the lack of support for lifting foreign ownership regulations – something he would prefer to see happen – the public must be prepared to pay.

“I do not like the idea of putting taxpayers’ money or taxpayer support behind Qantas but if it is the view of the Australian people that we should have a national flag carrier then that does come at a cost,” he was quoted as saying in the AFR.

Federal support for Qantas would shore up its credit rating which is currently at the lower possible investment grade level. Any further downgrade would see it categorised as “junk”.

The AFR reported that while Qantas has $2.8 billion of cash, there are suggestions that hundreds of millions of dollars could be restricted by credit card companies if its investment grade rating was lost.

The carrier would also need to pay a higher interest rate on its $4.8b of debt facilities.

Virgin Australia said in a statement that the Qantas Sale Act is a "matter between the Government and Qantas".

But the carrier did call for a "full and proper investigation" into Qantas's 65% domestic "line in the sand" market share policy.

Latest News