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By Root 277 0

Behind the scenes frantic and complex negotiations were taking place. The government finally acted. On 26 May 1992 the Qantas directors received a short and startling message: ‘There has been an important and urgent development concerning privatisation. In short, Qantas has an immediate opportunity to purchase all the shares of Australian Airlines. The government is seeking a signed agreement from Qantas this evening.’4 The price was $400 million – a great deal more than the $150 million Qantas had first offered for the loss-making domestic airline. But CEO Ward, a mathematician, had crunched the numbers and knew that the deal, like the airlines, would fly.

On 2 June 1992 Mr Keating announced a ‘little bit of history’ to the assembled Canberra press gallery.5 The government would sell 100 per cent of Australian Airlines to Qantas for $400 million and then offer 100 per cent of Qantas for sale by public float and trade sale, retaining a golden share to safeguard the national interest.

The aviation industry approved. The regulations that had kept Australian domestic and international flights strictly apart for so long had been swept aside. Aircraft magazine described the government’s move as ‘breathtaking’ and said it would ensure Australia had ‘at least one airline strong enough to compete in an increasingly concentrated international market dominated by a few mega-carriers’.6

The combined airlines had 84 aircraft, and passengers immediately felt the benefit as Qantas put Australian jets on some of its routes. As the two airlines merged the obvious cost savings came into effect. Significantly the key job losses were from the board of Australian, with Qantas chairman Bill Dix asking for the resignation of Australian chairman Ted Harris and all the board apart from himself, Qantas CEO John Ward, and managing director and former Qantas man John Schaap, who remained as managing director.

Now the Australian government had to find a trade investor to buy into Qantas. The same three bidders remained in the race: British Airways, Singapore Airlines and Air New Zealand. To sweeten the deal the government promised to pump over $1 billion into Qantas, finally granting the Qantas board the taxpayer capital injection it had pleaded for, just in time to benefit the new private shareholders. British Airways quickly emerged as the most serious contender, despite losing Lend Lease as a potential partner. The loose alliance between the builder and the airline was only revealed by incompetence, when a confidential facsimile from the chairman of the Australian government’s Asset Sales Task Force, Harold Heinrich, intended for British Airways, was accidentally sent to a Sydney stockbroking house.

Despite the long history of a mutually beneficial partnership between the two airlines, Prime Minister Keating had to reassure the Cabinet that Qantas would not fall completely into foreign hands and John Ward had to reassure the public. ‘There’s no contemplation of letting control leave Australia,’ he told the Sydney Morning Herald. It was not a sentimental decision; if there was foreign control ‘we could well find we lose all our operating rights. By all means, we could have some foreign shareholding but not foreign control – that just can’t be contemplated.’7 That foreign shareholding came into being when British Airways paid $665 million in return for a 25 per cent share in Qantas on the proviso it was given three seats on the board. When the trade sale went through in February 1993, the government pumped $1.35 billion of Australian taxpayers’ money into Qantas.

The question at the time was whether Qantas could have picked a better, or at least ethically cleaner, partner. The month before British Airways handed over the cash for its share in Qantas, it had been forced to hand over £4 million – $9.3 million – to tiny British rival Virgin in an out-of-court settlement, after a British Airways dirty tricks campaign went horribly wrong. Virgin boss Richard Branson was given a public apology and $500,000 compensation for personal libel, which he