Levelling the Australian Aviation Landscape.

[Tony the Tiler]

Debt guarantees and repealing legislation are all a side issue in the face of what is conveniently being ignored by your leaders. The Air Navigation Act of 1920. Now the two main players probably don’t want any light cast on this issue for their own reasons. Given that this is a rumour network, I presuppose the following-

Virgin don’t want investigations in this area for two obvious reasons

1) They might have to limit their foreign ownership to 49%, or

2) Cease international operations.


And Qantas probably has a reticence to expose the Virgin Australia International Holdings Pty Ltd (VAIH) structure as:

1) They want to emulate it once the Qantas Sale Act is repealed; and/or

2) They are worried that Singapore Airlines may react in kind and kill off Jetstar Asia (and any other opaque Asian investments)


Section 11A of the Air Navigation Act limits foreign shareholdings and relevant interests to 49% of an Australian international airline.

11A Foreign shareholdings in Australian international airlines

(1) The Minister may, by written notice, require an Australian international airline:

(a) to give to the Minister such information as is specified in the notice concerning the extent (if any) to which foreign persons have relevant interests in shares in the Australian international airline; or

(b) if foreign persons have relevant interests in shares in the Australian international airline that represent, in total, more than 49% of the total value of the issued share capital of the Australian international airline—to take all necessary action to ensure that its constitution complies with subsection (2).

(2) The constitution of an Australian international airline complies with this subsection if it:

(a) imposes restrictions on the issue and ownership (including joint ownership) of shares in the Australian international airline so as to prevent foreign persons having relevant interests in shares in the Australian international airline that represent, in total, more than 49% of the total value of the issued share capital of the Australian international airline; and

(c) confers the following powers on the directors of the Australian international airline to enable the directors to enforce the restrictions referred to in paragraph (a):

(i) the power to do anything necessary to effect the transfer of shares held by a person;

(ii) the power to remove or limit the right of a person to exercise voting rights attached to voting shares;

(iii) the power to end the appointment of a person to the office of director of the Australian international airline.

(3) For the purposes of this section, a person has a relevant interest in a share if, and only if, the person would be taken to have a relevant interest in the share for the purposes of the Corporations Act 2001 if paragraph 608(3)(a) of that Act were disregarded


I don’t think it is in dispute that VAIH has limited its foreign shareholding to less than 49%. But maybe it’s worth seeing just how much of a ‘relevant interest’ VAH has in the operations of VAIH. If you truly want a level playing field, it may be time to review and ask the question – is the intent of Section 11A of the ANA being complied with?

[C441]

2) They are worried that Singapore Airlines may react in kind and kill off Jetstar Asia (and any other opaque Asian investments)

We can only hope! :)

(.....although by now SQ probably realise that Jetstar's International forays are doing as much to hamper Qantas as their own investment in Virgin in Australia!)

[PoppaJo]

The SQ Group (Sing, Tiger, Scoot) are doing a pretty good job at creaming Jetstar in Singapore. They will only get stronger while Jetstar halts growth.

Scoot 787's Singapore to Melbourne should kill them off.

[Prince Niccolo M]

Tony,

Great question.

Problem is that the intent of any legislation is a subject for Parliamentary debates and little else. What the judge and the lawyers look at is the black letter law and if no statutory interpretation is necessary, the intent is irrelevant.

I wonder how they would go with the EU "effective control" test in EU REGULATION (EC) No 1008_2008 which is defined in Article 2 as:

9. 'effective control' means a relationship constituted by rights, contracts or any other means which, either separately or jointly and having regard to the considerations of fact or law involved, confer the possibility of directly or indirectly exercising a decisive influence on an undertaking, in particular by:

(a) the right to use all or part of the assets of an undertaking;

(b) rights or contracts which confer a decisive influence on the composition, voting or decisions of the bodies of an undertaking or otherwise confer a decisive influence on the running of the business of the undertaking;

Given the status of VAIH as a 'virtual' airline exclusively contracted to VAH as a service provider and with VAH having two seats on the Board of VAIH, the public examination would be most illuminating :E :E :E

[porch monkey]

Well, I guess if they were flying to the EU, it would matter. They aren't, and it doesn't. The Indonesians don't seem to have a problem with it. Neither does the Australian Government. Soooo, which one of you is going to run the court case?

[Prince Niccolo M]

porch monkey,

Well, I guess if they were flying to the EU, it would matter. They aren't, and it doesn't.
Except that Australia recently signed a new ASA with the EU and the issue here is about Government rather than airline behaviour, notwithstanding that code-shares come under ASAs :eek:

I thought choosing the Indonesians as your justification is interesting for two reasons:

1. The Indonesian approach to 'substantial ownership and effective control' in their ASAs happens to be 'majority national ownership' and stuff the control bit - see PT. Indonesia Air Asia, Tiger/Mandala etc. :oh:

2. How would you know what Indonesia thinks of the arrangements? Any concerns that they have would be expressed behind closed doors with the joint DFAT/DIRD team and, unlike our Labor Government, there would be no precipitate shutting down of a critical trade relationship when the opportunity presents itself for a bit of horse-trading on other issues. :E :E

I don't have a dog in this fight, other than a desire for transparency in Government policy.

I would still like to know what Government review of the Virgin restructure took place or whether it was just DIRD pursuing its own economic agenda. I would like to know if the Virgin restructure did upset any of our bilateral partners. Without worrying about whether it was right or wrong, I do want to know if we have a new benchmark for organisational arrangements in aviation, since there is a flow-on to other industries and what is acceptable under the Corporations Law.


Pretty sad that it requires going to court to get some sort of independent assessment of whether something is permissible or not :(

[porch monkey]

It always requires someone to go to court to get a legal interpretation. It is the basis of the legal system. You don't agree that someone is within the law, then sans a personal agreement, court determination is necessary. Can't see Joyce calling up JB to work it out. You can rest assured that if QF thought that they had a case it would already be in court. The fact that it hasn't, means that they know they don't have a case. I chose the "Indonesian" circumstances as they have in the past made noises about just such a thing, causing some discomfort for VA. Which apparently have been resolved to the status quo. Costing a lot of coin along the way as well.........

[Gate_15L]

Is the intent of Section 11A of the ANA being complied with?

Does it matter with VAI?

They also hold a NZ AOC. Doesn't that also give them Open Skies with Australia allowing flights to other International destinations outside Australia though Australia?

So worst case scenario, they "can't" operate internationally... Wouldn't their solution just be to slap a ZK onto the 5 B777 and the 10 737 doin Bali and continue on their merry way...

[BP2197]

This is against my ideology but a government could legislate that all domestic aircraft maintenance must be done onshore. The current state is that this would be like a tax on the citizens of Australia however if there was sufficient competition between the brands, it could actually do wonders for Australia's work practices and level of efficiency.

[Australopithecus]

Hmmm. "Fly here/Fix here" I like it. The government could easily mandate a proportionate mtc burden. Wouldn't that be fun?

[porch monkey]

But then you'd have to get used to paying more than an airport taxi fare to get to SYD. Yeah right.

[sandpit]

So who are the 51+% shareholders of VAIH?

Or is it simply the case that VA is a company registered and listed in Australia and as such is considered an Australian entity, regardless of the fact it has 80+% foreign ownership? Therefore it can own VAIH 100% and VAIH can then be considered to be 100% Australian owned?

If anyone has their head around this I would appreciate the clarification.

[600ft-lb]

You can rest assured that if QF thought that they had a case it would already be in court. The fact that it hasn't, means that they know they don't have a case.

Either that or it's a structure they will be attempting to replicate in its entirety soon with the QSA removal. The international and domestic AOC's are just about in place.

So who are the 51+% shareholders of VAIH?

Or is it simply the case that VA is a company registered and listed in Australia and as such is considered an Australian entity, regardless of the fact it has 80+% foreign ownership? Therefore it can own VAIH 100% and VAIH can then be considered to be 100% Australian owned?

If anyone has their head around this I would appreciate the clarification.
It's not illegal for foreigners to own 100% of a purely domestic operation in Australia. Tiger, Virgin, Skywest, Rex have all been owned majority by foreigners in the last 10 years.

If you want to go digging go look up the ownership arrangements of Jetstar Asia. Yes Qantas directly only owned 49%, there is an interesting (Qantas supplied) funding deal for the other 51% and consequentially its a Singaporean flag carrier. A successful government lobby by Qantas in preventing the VAH ownership structure might have unintended consequences elsewhere in the form of retaliatory action.

At the end if the day, Qantas have not gone through all the regulatory pain and cost associated, to split the domestic and international AOC's to show better 'accountability'. The final hurdle is the QSA.