By ROD McGUIRK
2014-03-05 10:01 AM
CANBERRA, Australia (AP) -- The Australian government rejected a request from Qantas Airways for a 3 billion Australian dollar ($2.7 billion) unsecured loan to help the national carrier return to profitability, the prime minister said on Wednesday.
Cabinet ministers on Monday decided against providing Qantas with a debt facility, and instead agreed to relax foreign ownership restrictions which impede the airline's ability to raise capital.
Prime Minister Tony Abbott said Wednesday that his ministers had acted on expert advice from accounting firm PricewaterhouseCoopers to decide that Qantas did not need the requested line of credit.
"You would never in a fit lend anyone AU$3 billion on an unsecured basis without doing what's called due diligence on that person," Abbott told Macquarie Radio.
"So we sent in various experts to have a look at Qantas, and the conclusion that we came to based on their advice was that Qantas does not need an unsecured facility from the government," he said.
The rejection comes after the former state-owned airline last week posted a first-half loss of AU$ 235 million amid tougher competition. Qantas said it would cut 5,000 jobs in a bid to slash costs by AU$2 billion over three years.
The government plans to repeal legislation that prevents foreign airlines from holding more than 35 percent of Qantas and any single foreign investor from holding more than a 25 percent stake. The legislation also mandates 51 percent Australian ownership.
But Abbott has yet won the support of senators outside government who he needs to pass the reforms through parliament. Opposition parties have voiced objections to any reforms that could send Qantas jobs overseas.
The main opposition Labor Party prefers a government loan to secure Qantas' future, but regional Australian airline Rex warns that such a loan would distort the Australian aviation market.