July 15, 2014 / 11:36 PM / 3 years ago

Qantas foreign investment can rise, but to stay majority Australian-owned

SYDNEY (Reuters) - Qantas Airways Ltd will be able to increase its level of foreign ownership but will remain majority Australian-owned after more ambitious changes being pushed by the federal government were blocked by opposition parties.

A deal struck between the Liberal Party-led coalition government and the opposition Labor Party allows current limits on ownership by individual investors of 25 percent and by foreign-owned airlines of 35 percent to both rise to 49 percent.

But a 49 percent cap on foreign investment in the national flag carrier will remain in place after negotiations revealed a government bid to scrap it would not pass a hostile Senate, the upper house of parliament.

The Qantas Sale Amendment Bill has already passed the lower house and is due to be debated in the Senate this week, where Prime Minister Tony Abbott’s government is outnumbered and has found itself blocked on a number of major legislative bills.

Transport Minister Warren Truss said the amended bill would go some way to easing restrictive ownership provisions on the struggling carrier, which is expected to unveil another loss when it reports full-year results next month. The airline posted an underlying loss before tax of A$252 million ($226 million) for the first half.

“Qantas will still operate under restrictions that do not apply to any other Australian airline, but will have greater capacity to attract new investment,” Truss said. “It is important that Qantas be granted greater flexibility and this is the only outcome the Senate will pass at this time.”

Qantas said it was heartened that there was general agreement the Sale Act disadvantaged the company and that change was needed, but was disappointed in the compromise deal.

“While removing all restrictions that apply only to Qantas remains our preference for leveling the playing field, changing the 25 and 35 percent limits would represent an improvement on the status quo,” the airline said in an emailed statement.

Chief Executive Alan Joyce has repeatedly said the struggling carrier is fighting lavishly funded competitors “with one hand tied behind our back”, citing the unfettered foreign funds provided to Virgin Australia and others.

Although officially a domestic airline, Virgin Australia is nearly two-thirds owned by non-Australian carriers - Etihad, Singapore Airlines and Air New Zealand - whose investments have provided funds for growth.

Reporting By Jane Wardell; Editing by Richard Pullin

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