What is wrong with foreign ownership?

The Government have said they want to remove the cap on foreign share ownership of Qantas. This has led to a massive outcry against the move. But what is the economic argument for this opposition?

I have to say I can't think of a single valid reason to oppose allowing foreigners to purchase a controlling interest in Qantas. All of the reasons put forward seem to be simple national pride and a misguided idea that there will be more Australian jobs in an airline owned by Australian superannuation funds.

Tim Congdon, a British free market economist who is fiercely nationalistic (he stood for the UK Independence Party in 2010) stated, "I don't mind who owns the British car industry, or all of British industry, as long as everyone has a job." He said this in around 1999, in 2013 the UK car industry, which is almost exclusively foreign owned, again produced more cars in the year than EVER BEFORE (they did the same in 2011 and 2012).

So we need to be sensible when looking at Qantas and avoid the knee jerk reactions of politicians and unions pursuing their vested interests.

Qantas operates in a highly competitive industry (although it is protected by the government which prohibits more flights by foreign airlines). It is known as a highly contestable market. Firms can enter and leave easily when they already have aircraft. Suppose the traffic between Melbourne and Sydney drops off by 10%. Then airlines switch aircraft around. Smaller ones fly Melbourne-Sydney, or the airline switches flights to other destinations. If things change then they reorganise again.

However what a modern airline needs is a fleet of modern aircraft that is flexible. Modern aircraft are efficient and require far less maintenance than previous models, so they can allow airlines to cut prices. Large fleets mean that aircraft can be substituted for one another as route demand changes.

Foreign capital would allow Qantas to modernise and expand their fleet. That is the best way to keep jobs in Qantas.

But let's suppose Qantas can't compete in the market. Then they deserve to go under. Will people stop flying then? Of course not. Other airlines will emerge and they will employ people locally. In 2012 Emirates employed 5000 Australians, Qantas employed 37,500.

Does it matter if foreign airlines employ the Australians? Not at all as long as Australians get airline seats at competitive prices. Passengers are the people we should be worried about, and for that we need an 'Open Skies' policy where no one airline is favored by a government more concerned with Herlad Sun headlines and their poll ratings than the long term welfare of the country.

The Guardian reports the whinging Aussies here