Qantas has had its debt rating cut to junk status by Moody’s Investors Service
on the back of a recent first-half loss of (USD225-270 million) and rising competition on domestic routes. As such, we expect
that Qantas' business risk and financial leverage will remain at
elevated levels and inconsistent with an investment grade rating," said
Ian Lewis, a Moody's Senior Vice President.In its
report, Moody's blamed the deterioration in the airline's operating
profile on aggressive competitive actions by Qantas' key domestic
competitor, Virgin Australia,Brisbane Int'l.
"These actions, which include capacity additions, have shifted the
market dynamic against Qantas in a structural way. Lewis went on to add that in
the absence of any policy changes from Canberra or any viable
counter-measures to Virgin Australia's tactics, Qantas' status would
remain unchanged. "Whilst the issue is currently a matter of discussion
and the government has not yet detailed how it plans to proceed, a form
of government support would, depending on form and structure, also
potentially provide support for Qantas' liquidity position and/or credit
profile. Moody's will observe any potential for positive credit impact
when and if such counter-measures are announced and depending on the
form of the support".