The Abbott Government has vowed to lift foreign ownership restrictions on Qantas and dump requirements for the Flying Kangaroo's headquarters to be in Australia, putting thousands of jobs on the line.
In a decision that puts Qantas' future in the hands of an unpredictable and fractious Senate, Federal Cabinet last night dismissed the airline's appeal for a debt guarantee.
Instead, it agreed to dump key parts of the Qantas Sale Act that restrict foreign shareholding in the company to 49 per cent and force Qantas to keep its maintenance, catering and administration services in Australia.
The Labor Party, the Greens and the Palmer United Party all oppose lifting the foreign ownership restrictions.
But Prime Minister Tony Abbott appealed to Labor, saying that since it was responsible for privatising the airline in 1992 it must now "set it free".
Mr Abbott acknowledged that Cabinet's decision would mean some of Qantas' 32,000 employees would lose their jobs. "If some jobs have to go offshore in order to ensure that Qantas has a strong and viable long-term future, it may be regrettable but nevertheless it is the best way to guarantee Australian jobs for the long term," he said.
Treasurer Joe Hockey, who last month said Qantas qualified for Government assistance, said the airline's business was fundamentally sound and that other options before Cabinet were "decidedly unattractive".
"We don't want to be in the business of subsidising any single enterprise," he said.
If Cabinet's decision is supported by Parliament, then Qantas would be split into two corporate entities, Qantas International and Qantas Domestic.
Under international conventions, Qantas could only retain its national-carrier status by ensuring its international arm continues to be majority Australian-owned. This would effectively mirror Virgin International's management arrangements, which Qantas chief Alan Joyce last year described as a "sham".
And, like Virgin, Qantas Domestic would be open to international buyers, with the consequence it could station its maintenance crews overseas.
Conscious that changes to the Qantas Sale Act were unlikely to secure sufficient support in Parliament, Qantas executives had instead advocated the Federal Government give it a debt guarantee.
Labor leader Bill Shorten last night accused the PM of abandoning thousands of Australian workers.