Australia eases foreign ownership rules for Qantas

Australia will relax some foreign ownership rules for national airline Qantas, the government said Wednesday, easing the way for the "Flying Kangaroo" to form an alliance with an overseas carrier.

Qantas will remain majority 51 percent Australian-owned -- a condition considered in the national interest -- but rules capping foreign individual ownership at 25 percent and overseas airline stakes at 35 percent will go.

"This will increase Qantas's ability to compete for capital and to take opportunities to form strategic partnerships in an increasingly globalised industry," Transport Minister Anthony Albanese said.

In a paper to guide the aviation industry for the next two decades, the government also eased rules for hand luggage -- with tweezers, knitting needles and nail files no longer banned on flights and metal cutlery reintroduced.

In contrast, screening of baggage and individual passengers will be tightened.

"It is time to do more than have an ad hoc approach to aviation issues as they arise," Albanese told reporters in Canberra.

The minister said the government would also encourage foreign airlines to increase their services outside the major arteries of Sydney and Melbourne to secondary international airports such as Cairns, Darwin and Broome.

"Australia will offer foreign airlines unlimited access to secondary gateway markets... and offer improved access to major destinations for those international flights which go through tourist venues such as Cairns," he said.

Qantas welcomed the announcement, which was previewed by Albanese in late 2008 when he said the government wanted to put the carrier on a "level playing field" with rival airlines.

Chief executive Alan Joyce described the removal of the foreign ownership caps as a step forward.

"This change will increase Qantas' flexibility as it meets the challenges of an uncertain global economy and business environment, opening up opportunities for strategic growth and alliances," he said.

"It gives Qantas parity with Australian carriers governed by the Air Navigation Act when it comes to attracting capital.

"Qantas has ambitious goals for fleet, product and infrastructure renewal -- and access to capital will be vital to achieving those objectives."

The iconic carrier said it would remain an Australian airline, but it has long believed that an alliance with a foreign carrier would make sense.

In December 2008, Qantas and British Airways walked away from talks on a planned 6.0 billion US dollar merger after failing to reach agreement on key terms.

Had they combined, their 500-plane fleet would have constituted one of the world's biggest airlines.

Qantas said Wednesday it had no "plans afoot to consolidate directly with other international airline companies."

"At the moment the global aviation industry is pretty tough," government and corporate affairs executive David Epstein said.

"Yes, we've had conversations with other airlines in the past, yes, we've always said we're open to a conversation, but we don't have any plans afoot."

But Australia's opposition party flagged concerns about the white paper and called for caution, citing Qantas' role in assuming official tasks such as bringing home citizens stranded by unrest overseas.

"There have been numerous examples where Qantas, as an Australian-owned airline and an airline that relies heavily on government regulation, has undertaken tasks in the national interest," Joe Hockey said.

Meanwhile, Qantas' professional engineers union said they would strike for five days from Thursday, saying the airline was not addressing engineers' concerns about sleep and fatigue. The strike is not expected to immediately affect flights.

-- Dow Jones Newswires contributed to this report--