Updated with Qantas statement

It could be the ultimate irony for Qantas if John Borghetti, the ex Qantas executive general manager who has lead Virgin Australia to Qantas beating profitability, has also invented the solution to freeing up its share price to increased demand from foreign investors.

Consider this. The proposed restructuring of Virgin Australia into a domestic operation which has no limits on foreign ownership, as allowed by Australian law, while placing its international operations into an unlisted holding company which will continue to meet the international traffic treaty criteria for being a majority Australian owned and controlled flag carrier has profound implications for Qantas.

It will deliver Virgin Australia a degree of investor flexibility that Qantas must already be crawling all over, working out whether it should perhaps demand a total repeal of the Qantas Sale Act, which caps foreign ownership of the group to 49%, or alternatively, mount an argument that Virgin Australia should be bound by more liberal and uniform ownership and national interest laws that would apply equally to all Australian airlines that seek to operate abroad as Australian flag carriers.

And putting aside any such lofty considerations, Qantas must also be concerned at what it can do to the Virgin Australia share price in terms up upward opportunities currently denied to its stock.

The first CEO of the modern listed Qantas, James Strong, and his successor Geoff Dixon, and in particular Gary Pemberton during his tenure as chairman, seldom if ever let an opportunity pass to argue the case for lifting the foreign ownership cap imposed by the Qantas Sale Act to facilitate the ‘pricing tension’ that would drive its share price higher because of higher demand from international investors who were always prepared to value airline stocks higher than Australian investors.

Of course a lot happened later, including most recently, Geoff Dixon’s involvement as a proponent of the Air Partners Australia leveraged equity buy out bid of 2006 that would have, in the light of the GFC, totally destroyed Qantas  after its then shareholders had escaped through the exits laden with carrying more money than today’s investors can even dream about under the current Qantas structure.

A major point of interest for Qantas owners today is what exactly the benefits might be if the company was to sell Jetstar, which as a trans border low cost franchise, appears to be immune to the intentions and purpose of the Qantas Sale Act, but has also been so far, a rather ordinary investment in terms of returns on the Qantas assets that it uses.

Qantas CEO Alan Joyce made so many references to the risk that it might have to sell off Jetstar if the beastly amendments proposed to the Qantas Sale Act by Senators Nick Xenophon and Bob Brown were ever to get up that an observer of his recent testimony at a Senate Committee hearing  could be excused for being reminded of Brere Rabbit pleading not to be flung into the briar patch.

But that’s just an observation.  While Qantas under Alan Joyce insists it is still pursuing an Asia based investment in a premium carrier controlled by its natural enemies and located in the wrong city in order to rescue Qantas from a cruel world ruined by unionists, geography and competitors with better planes, better product and more relevant networks, Virgin Australia under John Borghetti has come up with something that can enrich a determinedly Australian enterprise without engaging in ideological warfare with its own people or plundering its core assets to equip an adventure in Asia.

There is from a Qantas point of view, some urgency in deciding what to do about the Virgin Australia restructuring.  The Qantas Asia premium carrier strategy has deteriorated into something for free from people who compete with Qantas, and Virgin Australia, with or without an investment from Etihad, can bring new resources to bear on the domestic network which is the profitable core of the shrinking Qantas empire.

No doubt entirely by coincidence, the CEO of Etihad James Hogan is visiting Australia early in March.

A Qantas spokesperson said this afternoon:

We are clearly at a disadvantage, as our key competitor is allowed to make changes to their business, which we can not. We are significantly disadvantaged due to these constraints.

There should be a level playing field for all domestic airlines in Australia. It is a shame that Australia’s national airline has to compete with one arm tied behind its back.

This is precisely the point we’ve been making during the recent Senate Inquiry into the Qantas Sales Act.

We aren’t seeking any favours, just asking for the same restrictions and freedoms as other Australian airlines have.”