No doffing of caps in Canberra

FEW political spectacles are more entertaining than government ministers seeking to explain the inexplicable. The plea by Qantas to have the 45 per cent cap on the airline’s foreign ownership lifted has been rejected. Announcing the decision, Transport Minister John Anderson bleated: “It is not a question of the Qantas arguments being illegitimate, it is that Cabinet was not convinced the arguments were strong enough for changing the arrangements.”

Treasurer Peter Costello was at least a little more robust. “Qantas is an Australian icon,” he bawled on ABC radio. So it is. But nobody is suggesting the airline is in danger of being flogged off to beastly foreigners – sharing the fate of icons like Speedo swimwear, Vegemite or Arnott’s biscuits. The request from the chief pilot Geoff Dixon is simply to allow the share register to be opened up to more overseas institutions.

Qantas has to spend at least $10 billion on buying new aircraft during the next four years, and perhaps $24 billion over the decade. Boeing 737-800s and A330 aircraft, demanded by white-hot competition on international routes, cost serious money. A big slice of it has to come from the stock market by way of share placings to institutions and other fund-raising issues.

Although we do not see the Union Jack painted on the Qantas tail fin, British Airways owns 21.4 per cent of the airline. That leaves just 26.4 per cent available for other foreign investors, as long as the 49 per cent cap stays. The Qantas lobbyists say that is just too skinny, and that it will add up to 2 per cent on the cost of capital to fund its fleet expansion – and perhaps to take a crack at buying up to 25 per cent of Air New Zealand. They believe lifting the ownership restrictions would ultimately boost the capitalisation of Qantas because the company would qualify for admission to the MSCI world index.

As we know, overseas fund managers would not buy the crown jewels at a discount if they were not in this index.

The Government claims the local capital market is deep enough to finance all the Qantas ambitions – but it is worth remembering Macquarie Bank rattled the tin for $6 billion to buy Sydney Airport recently, and almost knocked the market on its ear.

Many citizens might say ‘a fig for your share market and your indexes, we want Qantas to stay as Australian as lamingtons. And that is what it is all about.

The Howard crowd has just unleashed a quick run to sell the remaining 50.1 per cent of Telstra. Bemused Moree cotton farmer Dick Estens has been given three months to discover if the bush is happy with improved telecommunications services. A qualified ‘yes’ could result in Telstra 3 revving up on the starting grid. The Government is afraid of slipping on any banana skins while steering this $30 billion behemoth though parliament.

A tiresome debate on talk-back radio, airing complaints that Qantas will no longer call Australia home, is not what the Liberal pollies need. The existing arrangements already block any one shareholder from owning more than 25 per cent of Qantas, or aggregate foreign airlines owning over 35 per cent. The dilemma might be overcome if British Airways could be persuaded to divest some, or all, of its share stake. The debt-stricken carrier could use the money. But it would mean selling off its best investment. Salomon Smith Barney rates Qantas shares a buy up to $6.12 against the present $4.70. But the brokers say the knock back decision was: “A slap in the face to consumers and the airlines’ efforts to create a level playing field”.

We seem addicted to arbitrary limits on the free flow of portfolio investment. At State level, WA clings grimly to the 10 per cent limit on individual Burswood shareholdings. South Australians may have forgotten the cap on Santos was originally imposed for fear of an Alan Bond takeover in the 1980s.

The Federal Government has played the ‘national interest’ card again. That’s the same one that stayed in the deck when Optus was sold off to Singapore, but came out to block the Shell bid for Woodside.

We should be careful we do not get dealt out of the game one day.


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