MOODY'S: Exactly What The Government Gives Qantas Is Important

Alan JoyceGetty / Greg Wood

Credit agency Moody’s has released its first comments on Qantas, which is facing a downgrade to “junk” status.

Reported by Fairfax, Moody’s sent a note to clients which said the level of support the airline receives will be key.

Plans have been floated to buy a stake in Qantas, secure its debt and extend cheaper direct loans, though nothing has been announced yet.

Obviously help from the government would be a good thing. But the agency is pointing out the degree of assistance will matter.

“A form of government support would offset the effects of a very challenging domestic business, which faces downward yield pressure, driven by surplus capacity,” Moody’s said.

Qantas is already on the lowest investment-grade rating. A downgrade would see its debt “junked” as it competes with Virgin, which is looking to raise $350 million from overseas airlines and shareholders.

Boss Alan Joyce has lobbied the government for help, asking for it to harpoon Virgin’s capital raising, saying it is a way for the overseas airlines to squeeze its domestic business to the point where Qantas can’t fund its international arm.

Treasurer Joe Hockey has alluded to some form of taxpayer assistance in media interviews, though the details are still speculative.

While the government could axe foreign ownership restrictions that apply to Qantas, Joyce said in a note to staff this would not save the airline in time.

There’s more here.

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