Due to the threat posed by foreign airlines that buy shares of Australian air carriers, the Opposition has suggested amending Qantas's ownership law to achieve a more level playing field for the losing flag carrier.

When Qantas was privatised in the 1990s, the condition was that the air carrier could not be owned majority by foreigners. However, other local airlines such as Virgin Australia recently amended its charter and allowed a higher ratio of foreign ownership.

That situation threatens the financial viability of Qantas domestic operations which used to subsidise the air carrier's losing international operations until Alan Joyce, the chief executive of Qantas, separated the air carrier into four distinct units in May. The move's aim was to ensure that Qantas's domestic and international operations, Jetstar and the frequent flyers programme are run separately particularly in the area of finances.

Shadow treasurer Joe Hockey said the acquisition of Middle Eastern carrier, Etihad, into Virgin Australia warrants a review of Qantas ownership regulations. Etihad reportedly plans to acquire an even larger stake to 10 per cent in Virgin Australia, which has been slowly eating into Qantas's profitable domestic market.

Qantas rules limit foreign investment to 49 per cent, total ownership by foreign airlines to 35 per cent and single foreign investment to not more than 25 per cent. Mr Hockey proposed that Qantas's restrictions be lifted or for the Foreign Investment Review Board to place a cap on Etihad's investment in Virgin, currently at 5 per cent.

"We have to make a decision about whether Qantas does become a major international airline with a majority ownership overseas, or whether we want to retain it and pay a price for retaining it as an Australian icon," The Sydney Morning Herald quoted Mr Hockey.

Virgin denied that because of the substantial investment by Etihad, the Middle Eastern air carrier has a major say on the Australian air carrier's management or strategy.

MP Tony Burke admitted the issue of foreign ownership raised conflicting political and consumer concerns.

"You have real tension in making sure you provide the best possible prices for consumers, the flexibility in a competitive market and also respecting an Australian icon," Mr Burke was quoted by The Sydney Morning Herald.

Due to fears that Qantas may eventually fold up because of the strong competition by Virgin Australia, bolstered by petro dollars, Mr Joyce lobbied the federal government last week to block Etihad's reported plan to hike its stake in Virgin.

Mr Joyce's warning of the danger of a Qantas collapse came at a time that the International Air Travel Association forecast the possible closure of more established air carriers in the next 12 months due to the stiff competition in the global aviation industry and the soaring jet fuel price.

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