Qantas sale is tied to jobs

Steve Lewis in The Australian this morning says that the consortium bidding to buy Qantas will have to guarantee to keep jobs and maintenance facilities in Australia to win government approval for the $11 billion deal, with the bidders also be possibly being required to commit to maintaining the airline’s existing flights to regional Australia as the Howard Government plans to use its foreign investment review powers to protect the national interest.

Deputy Prime Minister Mark Vaile said yesterday the airline was in a “very unique position”, and laid out the Government’s intentions to ensure the Macquarie Bank-led private equity consortium provided guarantees on a range of issues.

But in a win for Qantas, Mr Vaile firmly ruled out suggestions that Canberra might allow Singapore Airlines to gain access to the lucrative trans-Pacific route, instead, confirming that the route would remain off-limits for several years to airlines other than Qantas and Virgin Blue.

Mr Vaile, who is Transport Minister, said Airline Partners Australia would face conditions similar to those imposed when Air New Zealand increased its ownership of Ansett from 50% to 100% in 2000.

Mr Vaile said that those conditions included requirements that the airline remain based in Australia, that it maintain regional routes and not significantly reduce skilled employment, adding, “Obviously we can’t be too interventionist, but this business, particularly post-Ansett, is in a very unique position in the Australian economy and therefore we need to move forward with great care in the process.”

“If you look at history on some of these aviation deals, in past experiences there have been conditions put on these things and Peter Costello certainly has the ability to do that.”

APA, which includes the US-based Texas Pacific Group and Allco Finance, is expected to lodge its formal offer for Qantas within weeks, after its $5.60-a-share bid received unanimous approval from the airline’s board of directors on December 14 and the Treasurer has responsibility under foreign investment laws to ensure the deal does not breach national interest criteria.

Mr Vaile said his office had been inundated with calls from people expressing concerns over Qantas’s future under an owner that plans to lift the airline’s debt levels to 70%, adding, “If you look at the public response, a heap of people have contacted my office expressing concerns and just wanting to ensure that Qantas remains an Australian icon”.

Asked whether the Government would provide assurances that Qantas’s new owners would maintain this status, Mr Vaile said: “Absolutely, it is something we need to look at – the iconic value of the brand.”

Qantas has received an extraordinary level of political support in Canberra over the years and the airline has maintained a unique role in helping the Government rescue Australians when they have been caught up in unexpected outbreaks of conflict or political unrest, such as the recent evacuations in Lebanon.

Mr Vaile signalled this was one “national interest” issue he was considering as part of the wider examination of the deal, adding, “Where we needed to evacuate Australians out of those countries, we’ve always been able to call up Qantas, and they have come to the party”.  “I don’t know that we, in conditions on a sale, can prescribe that, but they are the sorts of things we have always been able to do, and that we want to do in the future.”

Following the public bid for Qantas, there has been speculation the Government would consider opening up the route to the US to other airlines, with Singapore Airlines pressing for years to gain access via Australia, but Mr Vaile said he was committed to allowing Virgin Blue to launch flights to the US from mid-next year without extra competition and asked whether there were plans to revisit the issue – which was decided by cabinet last March– Mr Vaile said bluntly: “No,” adding, “I have said to Virgin this commitment doesn’t last forever, but to be fair to them, they are making an investment of hundreds of millions of dollars in equipment and setting up offices on both sides of the Pacific and we need to honour that”.   “It would be a number of years before we revisit that, and I will be giving every encouragement to Virgin to get up and operating as soon as possible.”

Report by The Mole from The Australian