Moody's places Qantas ratings on review for possible downgrade

Moody's Investors Service placed (05-Dec-2013) Qantas Airways Limited's Baa3 senior unsecured and short term P-3 ratings on review for possible downgrade. The review was prompted by the company's announcement on 05-Dec-2013 of an expected underlying loss before tax of AUD250 million (USD225.7 million) to AUD300 million (USD270.9 million) for the 6 months ended 31-Dec-2013, as well as accelerated cost reductions and a capital expenditure and structural review in response to deteriorating market conditions. Moody's VP and senior credit officer Arnon Musiker said: "The rating action reflects the material downward pressure on Qantas' credit metrics due to declining yields, which reflects both low capacity utilisation in the domestic market following aggressive capacity additions by the sector, and a moderation in demand. While the Baa3 rating reflected these conditions, the extent of the announced profit downgrade, and the potential impact on the 2014 full year performance, is outside the rating expectation", said Musiker, adding "In the absence of countermeasures, the challenging operating conditions may therefore result in Qantas' credit profile no longer being consistent with the current ratings. Whilst the issue is currently a matter of discussion and the government has not detailed how it plans to proceed, a form of government support would also provide support for Qantas' credit profile". [more - original PR]