Qantas faces the potential of years in business limbo, whether or not Tony Abbott succeeds in an unlikely move to scrap the 49 per cent foreign ownership cap.
The government has revealed it has no ''plan B'' and is concentrating its efforts exclusively on repealing the foreign ownership restrictions, despite an obvious roadblock in both the existing Labor-Greens-controlled Senate and the new chamber to sit from July.
Qantas is now at the centre of a worsening political stalemate and it also faces serious demands from unions over its plan to cut 5000 jobs in the next 18 months.
Chief executive Alan Joyce is due to sit down with union leaders on Wednesday.
In Parliament, Mr Abbott tried to lay the airline's troubles at the feet of Labor and the current rules, which he said had given Virgin the upper hand.
''I'm all in favour of Virgin, I think they're a fine airline,'' he said. ''But as long as the opposition leader persists in his current position, he is giving Virgin a better deal than Qantas.
''Why would any Australian want to see the big flying kangaroo disadvantaged?''
With the requested debt guarantee previously backed by Treasurer Joe Hockey no longer on the table after Monday night's cabinet meeting, the airline is examining more dramatic measures to tackle its competitiveness, capital raising and debt-servicing challenges.
In the wake of the government's change of heart, the opposition and minor parties in the Senate have hardened their resolve to block any changes to the Qantas Sale Act, which they say would send thousands of maintenance jobs overseas and see the airline fall into the control of sovereign-backed foreign airlines.
The airline also faces fresh resistance from its own employees as unions prepare to increase the pressure for answers on the locations of job cuts.
A private letter obtained by Fairfax Media from ACTU secretary Dave Oliver to Mr Joyce asks for details about the job losses, seeks discussion of alternatives to job cuts, and asks for details on how the 5000 figure was arrived at.
Qantas management kept its counsel in the wake of the government move as Transport Minister Warren Truss admitted the government was committed to the legislative change, despite its almost certain failure in the Senate.
Admitting the Qantas request for a standby debt facility had been considered by cabinet, Mr Abbott repeated the government's argument that the best thing any government could do for the airline was unburden it from the carbon tax and unshackle it from the foreign ownership limits.
He called on Opposition Leader Bill Shorten to live up to the reform credentials of Labor leaders past, citing the original privatisation of the airline under Paul Keating and another proposal to back majority foreign ownership while in opposition in 2002.
The opposition, however, slammed the government's approach, warning that to take advantage of foreign investment, Qantas would need to split into two companies - international and domestic - which would be complex, expensive and could take years.
He outlined a series of challenges the airline would face, including the need for two air operator's certificates, arguments over which entity owned the debt, which owned the planes, which banks financed the different entities, the need for significant job cuts through forced redundancies necessitating significant up-front cash, and the attraction of a foreign buyer of what would be the domestic company. And, he said, that was before the Foreign Investment Review Board's consideration of any foreign entrant.
Mr Shorten said the process of obtaining an air operator's certificate would itself take a year.
In his letter to Mr Joyce last week, Mr Oliver demanded answers, including why alternatives to job cuts had not been considered.
The assistant national secretary of the Australian Services Union, Linda White, said the meeting between Qantas executives and unions on Wednesday would push the company to ''put in place an orderly process'' for redundancies offered to staff.
She said some in Qantas management had the tendency to ''go rogue'' and talk about redundancies for staff without first consulting widely on their plans. This, she said, created unnecessary stress for employees.
''We need an orderly process that complies with our enterprise agreement,'' she said.
With Clay Lucas
