Qantas' bet on state aid fails as Abbott blocks debt backstop

[SYDNEY] Qantas Airways' bid for government aid suffered a blow as Australian Prime Minister Tony Abbott ruled out guaranteeing its debt and instead proposed allowing more foreign investment in the airline.

The government will seek to amend the 1992 Qantas Sale Act, which caps foreign ownership at 49 per cent and forces Australia's biggest carrier to keep most operations in the country. The legal changes have a "limited chance" of getting through the Senate, Qantas said in response.

The airline known as the Flying Kangaroo last week announced 5,000 job cuts, the delay or sale of 50 aircraft, and a companywide pay freeze after a market share battle with Virgin Australia Holdings drove it to a A$235 million (S$266.7 million) net loss. Chief executive officer Alan Joyce has been lobbying the government since November to "level the playing field", accusing Virgin of using foreign government cash to undermine formerly state-owned Qantas.