Just how critical is a national airline to Australia? Many Australians - among them Qantas shareholders - are keen to see a competitive and global Qantas. And the main restraint on Qantas taking the unshackled road to commercial competitiveness is the strategic and political dimension of the 1992 Qantas Sale Act.

But one of the little-examined aspects of the debate over relaxing restrictions on foreign ownership of Qantas is the important role it plays in Australian defence.

The Sale Act requires Qantas to maintain a 51% majority of Australian equity and limits any combination of foreign airlines to 35% of share ownership in Qantas and any individual foreign investor to 25%.

Although it is not stated explicitly in the Act, Qantas aircraft can be commandeered by the federal government, if necessary for military purposes. Qantas can also be obliged to rescue Australian citizens which may be stranded as a result of natural disasters, war or other extreme events.

Qantas also owns Qantas Defence Services which is a division of the company employing 500 people and working in close association with the Royal Australian Air Force. Australia’s strategic position as an island continent means that should the government needs to call on emergency uplift involving Australian interests abroad it needs to exercise legislative control over an international carrier to fulfil its requirements. In Australia that carrier is Qantas.

If Qantas was subject to majority foreign ownership, some elements within the defence establishment may regard that Qantas' relationship with the Australian defence forces many be compromised. This is one of the challenges in altering the Qantas Sale Act.

Joyce has grounds to complain to his staff and to anyone who will listen that Qantas is operating with its hands tied in a rapidly changing and increasingly globalised aviation environment.

He has quite correctly compared the restrictions placed on foreign equity in Qantas with high level of foreign capital injected into arch competitor Virgin Australia, through shareholders Etihad, Singapore Airlines and Air New Zealand, enabling Virgin to establish strong operational and marketing alliances with these carriers.

The Sale Act marked the transition of Qantas from a government-owned airline to a privatised carrier during the years of the Keating Labor government. It was drafted with an eye to encouraging a competitive and commercially viable Qantas, while maintaining a majority Australian equity and an Australian identity.

But the commercial airline landscape has now vastly changed. In 1992 most international airlines - whether government owned or privatised - operated within a single country. It clearly fitted into the changing Labor ideology of privatising key government owned businesses conditional on guaranteed Australian equity and control of the Hawke and Keating era between 1983-1996.

Air France and KLM Royal Dutch Airlines have been a single company since 2004. In South America the national carriers of Chile, Peru and Brazil became a single airline TAM. In the cut-throat airline business, it is increasingly clear the airlines which survive are the airlines that are big and in many cases multinational. The direction that Virgin Australia has taken is compelling evidence of that trend.

The coalition government is ideologically supportive of free trade. Hockey has this week floated an easing of the Sale Act, which Qantas chief Alan Joyce has said is unlikely to pass in the current parliament. Both Labor and the Greens are opposed to any change to the Act.

Abbott has not not yet revealed his stance, saying only that he has not seen a specific proposal on the future of Qantas, but wants the airline to be “strong and continuing”.

From a public perspective, any actions perceived as undermining Qantas' corporate position as an Australian carrier may be viewed by some as selling off an Australian icon. Virgin has a relatively short history since 2000 of identifying with Australia. Essentially as the child of British entrepreneur Richard Branson it has always been seen as an international carrier with an Australian name as either Virgin Blue or Virgin Australia.

Qantas has a history embedded with Australia since 1922 and while the public may not get hot and bothered about the extent of foreign ownership of Virgin Australia, attitudes towards majority foreign ownership of Qantas are likely to be resisted from the political left and the union movement who would focus on a threat to Australian jobs. Qantas' recent downgrade of its Geelong maintenance facilities has already been widely condemned by the union movement.

Another big question is whether Qantas commands sufficient support within the broader Australian tourism industry to galvanise political pressure to reform or relax the Qantas Sale Act. From a tourism industry perspective, there is considerable support for a more competitive Qantas. However, the issues involved clearly extend beyond the dimension of commercial competitiveness.

The author

David Beirman

Senior Lecturer Tourism at University of Technology, Sydney

This article was republished with permission from The Conversation