Tony Abbott is heading into Monday afternoon's cabinet meeting determined to frustrate Qantas management's hopes for a government-backed debt guarantee.
While Treasurer Joe Hockey has spent the past few weeks indicating he would consider guaranteeing Qantas' debt, the Prime Minister appears to have hardened his views against that course of action.
Asked on Monday whether the idea of a debt guarantee was off the table entirely, Mr Abbott replied: "If you do something for one, in fairness you've got to do it for all.
"This is a government which is not in the business of favouring one company over another."
Following Qantas confirming last Thursday it would cut 5000 jobs, Virgin reported a $84 million first-half loss – from a $23 million profit in the prior half – as it competes fiercely on price with Qantas and Jetstar in the domestic market.
In his press conference on Monday, the Prime Minister praised Virgin Australia CEO John Borghetti, who has protested loudly against the federal government giving any aid to his competitor, Qantas.
Mr Borghetti has said he has no problems with the government scrapping the foreign ownership restrictions in the Qantas Sale Act, but rejects government handouts or a debt guarantee, which would allow the national carrier to borrow money at cheaper rates.
While Qantas CEO Alan Joyce has avoided blaming the carbon tax for his company's failings, Mr Borghetti was in lock-step with the Abbott government on Friday. He blamed the carbon tax, among other factors, for hampering Virgin's business.
"I hope that that clip of John Borghetti might get replayed tonight because he does know what he's talking about," Mr Abbott said on Monday.
"He's running Virgin, he was very senior in Qantas, he knows as much about the airline industry as anyone.
"And his clear statement, no ifs no buts, the best you can do for the airline industry right now is get rid of the carbon tax."
The Abbott government's preference is to scrap the 49 per cent foreign ownership restriction in the Qantas Sale Act, which would potentially allow Qantas to access hundreds of millions of dollars in foreign investment, as Virgin is able to do.
But the foreign ownership change is unlikely to pass either the current Senate or the new Senate, which commences on July 1, given Labor, the Greens and Clive Palmer all oppose letting Qantas become foreign owned.
Mr Abbott said on Monday that even if the government secured the repeal of the act, Qantas would still need to get the nod from the Foreign Investment Review Board to increase foreign shareholding.
And there was the further test - in separate air navigation legislation that would not be repealed - that an international airline cannot be designated as an Australian carrier if its foreign shareholding exceeds 49 per cent.
Australian international carriers must also meet other national interest criteria, including at least two-thirds of the board members being Australian citizens, the board chairman being Australian, the head office remaining in Australia and the operational base remaining in Australia.
Qantas posted a statutory loss last Thursday of $235 million in the first half of the year, a dramatic drop on a $109 million profit a year earlier.
On Monday, Opposition Leader Bill Shorten and Labor's transport spokesman Anthony Albanese both urged Mr Abbott to say "today" what the government would do to help Qantas. "Mr Abbott, when will you get your house in order, stop giving lectures to everyone else and start governing for the future of Australian aviation and our national carrier?" Mr Shorten, said in a press conference at Parliament House, Canberra.
Mr Albanese said it was "unequivocally" in the national interest for Australia to continue to have a national airline. He listed national security concerns and Australia's engineering skills base as important reasons to keep Qantas majority Australian-owned.
"For an island continent without land transport borders that is perhaps more important for Australia than any nation on earth," Mr Albanese said.
With Matt O'Sullivan, AAP
The story Tony Abbott locks horns with Joe Hockey over Qantas debt guarantee first appeared on The Sydney Morning Herald.