Emirates has ruled out taking a stake in Qantas, despite the much-trumpeted partnership between the two airlines.
Although foreign airlines are allowed to hold as much as 35% of Qantas under the terms of the Qantas Sale Act, Emirates President & CEO Tim Clark over the weekend ruled out investment in the beleaguered airline, which faces record losses and has seen its credit rating downgraded to 'junk' status.
"Equity is not on the table” Clark told Geoffrey Thomas, editor of the AirlineRatings website.
Clark also took a shot at Gulf competitor and Virgin Australia partner Etihad Airways, admitting that while he “will watch [the Qantas situation] carefully”, Emirates didn't possess Etihad's "bottomless pit of cash."
Etihad holds 20% of Virgin Australia – a share valued around A$250m – and expects that stake to increase to 21.2% as a result of Virgin's call for an additional $350 million of capital, pending approval from Australia's Foreign Investment Review Board.
Qantas is downplaying Clark's statement, with a Qantas spokesman telling Australian Business Traveller "We’ve been clear since day one that our partnership with Emirates isn’t about equity or ownership."
"It’s about network, frequency, lounges, loyalty programs and customer experience."
A foreign leg-up for the Flying Kangaroo?
Much of the current debate about "the level playing field" has cited the limits imposed by the Qantas Sale Act in comparison to Virgin Australia's lack of similar foreign ownership restrictions.
Under the Act any single foreign investor is limited to a 25% stake in the airline. Foreign airlines can hold no more than 35% in total, while total foreign ownership is capped at 49%.
However, not a single Qantas partner airline – not Emirates, not any of the oneworld allies, nor per-region partners such as China Eastern or new chum China Southern – has taken out any equity in the Flying Kangaroo.
Qantas Group CEO Alan Joyce has often called the Qantas Sale Act "the elephant in the room" when discussing potential equity opportunities with other airlines including British Airways, Malaysian Airlines and even Singapore Airways.
Joyce has consistently maintained that the airline is not seeking a handout from the Australian government, and would more likely welcome changes to the Qantas Sale Act and a government guarantee of its debt.
The former could improve the chances of investment from foreign airlines, while the latter could help Qantas regain its investment-grade credit rating and lead to reduced interest rates on borrowings, leasing and foreign exchange hedging costs compared to 'junk' status.
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About David Flynn
David Flynn is the editor of Australian Business Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.