So much for Joe Hockey’s Qantas debate. 24 hours later and Prime Minister Abbott has kyboshed it in favour of a buy back:
A government buyback of up to 10 per cent of Qantas has emerged as the most likely option to solve the airline’s problems after the prospect of lifting foreign ownership restrictions was scuttled and political enthusiasm for guaranteeing the airline was lukewarm.
With Labor, the Greens, Qantas and even Prime Minister Tony Abbott throwing cold water on a repeal or easing of the Qantas Sale Act, the government’s options were limited to a direct intervention or support to shore up the airline’s credit rating.
Senior sources have told The Australian Financial Review that Qantas has been seeking a form of loan guarantee from the former Gillard Labor government and now the Coalition, as it tries to compete against the foreign-owned Virgin Australia Holdings while constrained by the conditions of the Sale Act.
The Financial Review has obtained a ”letter of comfort” provided to Qantas by Labor transport minister Anthony Albanese in August to ward off a downgrade in its credit rating.
“I would expect the government’s long-term and ongoing recognition of the critical importance of the company to the economic and social fabric of the country to be an important element of the ratings agencies’ deliberations,’’ the letter says.
With Qantas again looking for some form of government support as soon as possible to stave off the prospect of a downgrade in its credit rating, Treasurer Joe Hockey is not keen on providing a direct guarantee.
…It is believed Mr Hockey and Mr Albanese have been talking and the emerging but not yet agreed political consensus is for the government to provide an implicit credit guarantee by buying between 5 per cent to 10 per cent of the airline back which, at today’s prices, would cost about $260 million.
Poppycock. Why do I want to own Qantas shares as a taxpayer? It’s not a strategic asset. It’s a political and cultural brand.
And if you’re going to buy back shares for the purposes of providing a half-pregnant guarantee then why are we paying market prices? For that matter, if we’re going to buy a leg of the flying dog why on earth aren’t we getting an equity stake in all of the other private companies that the Budget implicitly guarantees from credit downgrades, like the banks?
With respect, even if a buy back is the right idea, how can the Treasurer announce a debate about foreign ownership for Qantas on morning radio, the Opposition object by lunch time, the Prime Minister step in by mid-afternoon and the next morning a policy formulation with holes large enough to fly a 747 through be a fait accompli as the headline of the national business daily?
Why rush to a decision that makes no reference to an overarching philosophy or policy umbrella about how government and markets appropriately interact? What about the sovereign risk confronting investors in Virgin? If the Greens and Labor object, why can’t a considered decisions wait for a new Senate? Where does Clive Palmer stand on this? Are all such decisions to be rushed through to dodge the mining overlord?
There is almost no downside that I can see to letting international capital open up our skies to greater competition. Prices will fall and service will rise.
Most encouragingly, it will also make it far cheaper to fly our hapless political classes elsewhere.
