The federal government is set to provide Qantas with a debt guarantee as the first part of a bigger plan to allow majority foreign ownership giving the airline access to international capital.
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The plan would increase the pressure on the Labor opposition by making the removal of the debt guarantee - which exposes taxpayers - conditional upon allowing the airline access to greater foreign capital investment.
The Commonwealth debt guarantee would be provided for as long as the national carrier remains restricted from being majority foreign owned.
The interim move would make taxpayers liable for Qantas borrowings in the event of default. But it is also calculated to increase the pressure on Labor to wave through changes to the Qantas Sale Act, to which it is currently opposed.
With Qantas about to announce half-year financial results on Thursday, the government stepped up the case to amend the legislation, announcing for the first time an intention to introduce amendments that would lift foreign ownership limits and relax stipulations that major repairs and maintenance be carried out in Australia. The legislation faces a roadblock in the Senate.
The government is bracing for a bad result from Qantas on Thursday, aware that it could lead to thousands of job losses.
Transport Minister Warren Truss said the government would now move on the Qantas Sale Act, which he said had inhibited the airline's ability to grow.
''We have indicated an interest in being prepared to seek to legislate to take away the legislative and government-imposed disadvantages that Qantas faces on the domestic market,'' he said. ''The government is philosophically attracted to levelling the playing field.''
His announcement came as Tony Abbott told the Coalition party room the government would no longer be the ''ATM of last resort'' for struggling Australian businesses. He said it took courage to knock back requests for assistance from iconic businesses, but ''if you say yes, you will have a queue a mile long''.
Any move to change the act, which limits Qantas to 49 per cent foreign ownership, foreign airlines to a maximum 35 per cent stake and any single foreign shareholder to a 25 per cent stake, would probably be blocked in the current Senate, which is dominated by Labor and the Greens, and the next Senate which will sit from July 1, 2014.
Qantas refused to confirm reports on Tuesday it could axe 5000 jobs and sell its Melbourne Airport terminal.
