Shares plummet for Quantas as airline's credit rating cut to junk status
AUSTRALIAN airline Qantas – headed up by Dubliner Alan Joyce – has had its credit rating cut to junk status after it issued a profit warning.
The downgrade by ratings giant Standard & Poor's followed a shock loss warning from the carrier yesterday that sent its shares plummeting to their biggest one-day loss in almost 18 months.
Moody's also said it may cut its rating on Qantas below investment grade.
Australia's prime minister Tony Abbott spurned a plea for help from the carrier, saying subsidising the embattled airline would be "a bottomless pit".
Abbott's comments suggested Mr Joyce – a former Aer Lingus worker - had cut little ice with calls to government ministers yesterday seeking urgent action to assist Qantas, claiming its aggressive rival Virgin Australia Holdings has an unfair advantage.
"The point I make is that if we subsidise Qantas, why not subsidise everyone?" Abbott said in an interview on Melbourne radio station 3AW.
"If we subsidise everyone, that's just a bottomless pit into which we will descend."
The Australian flag carrier had been one just four airlines with investment grade ratings from Moody's or S&P.
The remaining three are Lufthansa, Air New Zealand and Southwest Airlines.
S&P's move to cut its main rating on the carrier to BB+, one rank below investment grade, could make it harder for debt-loaded Qantas to borrow funds.
The airline could also lose some shareholders whose rules on investment prevent them from retaining stock in companies rated at junk level.
Qantas warned yesterday that it expects a pre-tax first-half loss of between A$250 million and A$300 million (€166m to €199m) in the six months to December 31.
S&P said that warning caused the carrier's financial risk profile to deteriorate, adding it may cut Qantas's rating again.
The airline has long complained that Virgin Australia's access to foreign funding, via its major shareholders Gulf carrier Etihad, Singapore Airlines and Air New Zealand, has created an unfair playing field.