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In a landmark decision that will please the board of Qantas, the federal government has announced plans to repeal part three of the Qantas Sale Act governing foreign ownership following devastating financial results announced by the airline last week.

In a press conference late Monday evening, Prime Minister Tony Abbott, Treasurer Joe Hockey and Transport Minister Warren Truss confirmed they did not intend to offer a debt guarantee or a line of credit to Qantas.

Part three of the Qantas Sale Act restricts foreign ownership of the airline.

Under the plan, foreign ownership of the airline would be capped by the Air Navigation Act and the Foreign Investment Review Board. Deputy Prime Minister Warren Truss said the repeal of the Act would allow Qantas to compete on a level playing field with other airlines.

“It’s quite clear that the competition has been vigorous,” Mr Truss said on Monday night. “That’s meant that it’s been hard for Qantas, hard for Virgin, hard for its competitors and good for travellers.”

Mr Abbott said the decision was made after two hours of deliberation in federal Cabinet.

“We’ve come to a decision and I’m very confident that this is a decision which is best for our nation and ultimately best for Qantas,” he said.

Mr Abbott said Qantas could still in a “meaningful sense” be considered an Australian business if it was foreign owned, in the same way as its foreign-owned rival Virgin Australia.

“I reject … this idea that Qantas is Australian and Virgin isn’t because let’s face it, Virgin is employing Australians and it’s serving Australians.

“It’s hard really to say that Virgin is substantially less Australian than Qantas itself and what we want to ensure is that both of these fine airlines are operating under the same rules.”

Mr Abbott acknowledged the potential for further local job losses as warned by federal Labor.

“If some jobs have to go offshore in order to ensure that Qantas has a strong and viable long-term future, it may be regrettable, but nevertheless it is the best way to guarantee Australian jobs for the long term,” he said. Mr Abbott said a debt guarantee was discussed but rejected by cabinet.

“I am confident that our country can sustain a great airline into the future as we have in the past,” he said.

Qantas said the government’s proposal addressed an important long-term change, but noted it had a limited chance of passing the upper house where Labor and the Greens hold a majority.

“If this proposal by the government to change the Qantas Sale Act is not passed, we would expect the government and the parliament to consider alternative measures to balance the un-level playing field in Australian aviation,” Qantas said in a statement.

“We need immediate action to address the imbalance.”

Qantas chief executive Alan Joyce. Photo: AAP

Labor responds

In a hastily-called press conference, Opposition Leader Bill Shorten Treasury spokesman Chris Bowen and transport spokesman Anthony Albanese confirmed they would not support the government’s proposals, Mr Albanese arguing it was contrary to previous statements from Mr Truss.

Mr Bowen said the government had “walked away” from previous suggestions of a debt guarantee for the airline.

“He (Mr Hockey) clearly was indicating that was the road the government would go down and now the government walks away from it,” he said.

“This is about more than Qantas as important as Qantas is tonight.

“This is about Australian businesses having the trust and faith in the government of Australia.”

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—with AAP and ABC