08 May 2007

Qantas Sale Act breached?

In a 7 May 2007 media statement Australian Transport Minister Mark Vaile has in effect questioned whether the Qantas Sale Act has been breached (see 23 December 2006 posting) during the recent share-market activity associated with the bid for Qantas. Articles in the Australian and the Sydney Morning Herald on 8 May 2007 give some background on the issue.

It is important to understand that this issue is not primarily about some xenophobic dislike of foreign investment in a national icon. International airlines generally operate under bilateral air services agreements - treaties between governments - that in this case would allow Qantas to be denied operating authorisation by many other countries if it was found that the company was not "substantially owned and effectively controlled" by Australian nationals. This is designed to safeguard against the circumvention of these bilateral arrangements.

This was a live issue in 2001 when the New Zealand Government was considering proposals from Singapore Airlines and Qantas to invest in Air New Zealand at a time when major shareholder Brierley Investments had moved its head office to Singapore (see papers available on the NZ Treasury web site, in particular a report dated 16 July 2001 from the NZ Ministry of Transport). Unlike in the case of Australia, New Zealand has made considerable progress in getting the "substantial ownership" criterion removed from many but not all of its air services agreements. Prior to partial renationalisation, Air New Zealand had a share structure with 'A' and 'B' shares, with 'A' share only able to be purchased by qualifying New Zealand nationals.

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