View from The Hill

Qantas stalemate as Abbott and Shorten butt heads over the Flying Kangaroo

Prime Minister Tony Abbott believes Labor will pass his changes to the Qantas sales act through the Senate. AAP/Daniel Munoz

It’s passing strange to hear Tony Abbott advancing the gung ho “dry” argument that Qantas must not be treated as a special case.

But after he crossed that line in the sand by rejecting aid for SPC Ardmona and any attempt to rescue the car industry, his position on Qantas was a logical extension.

Not an automatic one, however. Qantas is an iconic Australian company. There was a great deal of pressure to treat it favourably. And indeed Treasurer Joe Hockey last month had set out the reasons why Qantas was different. He let hang out the prospect of it receiving a debt guarantee.

The airline wanted the guarantee as well as being freed up from the constraints of its sales act, specifically the ban on majority foreign ownership.

Until late last week, the guarantee or credit facility appeared almost certain to be extended. But then Abbott slapped it down in parliament, and suddenly all the emphasis was just on “unshackling” the airline.

Hockey looked awkward at the news conference when Abbott, deputy Prime Minister Warren Truss and he announced the decision to lift all ownership restrictions but not give the guarantee. The dynamics between the PM and his Treasurer on the issue are unclear.

When he was asked about the special case criteria he laid down last month Hockey said the first one he’d pointed to were the government-imposed conditions on Qantas that didn’t apply to competitors, “Well, today we are resolving to get rid of that discrepancy that works against Qantas”.

He also recalled that he’d said the government was being dragged “kicking and screaming” towards helping Qantas “because we do not want to be in the business of subsidising any single enterprise. It’s not sustainable in the long term”.

The government’s decision is economically sound.

First, it is sensible to level the playing field, and secondly it is correct, as Abbott says, that if one airline were to be given special consideration, the others would have a case too.

We are past the stage of a sentimental attachment to Qantas.

And remember too that Qantas’s overseas operating arm would still have to remain majority Australian owned, for reasons to do with Australian treaties on landing rights. These provisions are not being changed. So if there was majority foreign ownership the company would have to be split, as Virgin is.

Abbott produced a useful quote from former Labor minister Ralph Willis from the time of the Qantas sale act; Willis said that the Commonwealth could not countenance the possibility of still being potentially liable for Qantas debt once control of the airline was with the private sector.

While the government is on sound policy ground, it is also much driven by the politics. Labor privatised Qantas but now won’t go the next step to allow the majority foreign sell off (although it’s willing to negotiate on subsidiary limits – what foreign airlines and individual foreign entities can own).

Labor condemns the government for potentially facilitating the outsourcing of Australian jobs.

Bill Shorten declared: “Under Tony Abbott, Qantas will be Australian no more. Under Tony Abbott we will see thousands of jobs go overseas; cabin crew, flight attendants, maintenance workers, the majority of the board of director positions, the head office, even the chairman.”

The PM says, in essence, you might have to lose some jobs overseas in a longer term overall quest for jobs.

Abbott says he believes Labor will give in because it won’t let Qantas “bleed”. But if the opposition doesn’t capitulate, or some compromise isn’t reached, the implication is that the government will let the airline “bleed”.

Quite how that would play out would depend on how the company fared in the immediate future. Qantas has talked up its need for help – if the levelling of the playing field was blocked and there was no debt guarantee, it would be tested to the maximum.

Most immediately, the pressure is on the company, to lift its game, and on Labor, to accept the consequences of its original privatisation. If things don’t work out, the heat would come back on to the government. Qantas has given notice that if the sales act change is not passed, it will be knocking on the door. Very loudly.

Listen to the new Politics with Michelle Grattan podcast with Communications Minister Malcolm Turnbull here.