SYDNEY – Qantas Airways’ credit rating was downgraded to junk status Friday, one day after the beleaguered Australian carrier said it would slash 1,000 jobs and suffer half-year losses of at least 250 million Australian dollars ($225 million).
Standard & Poor’s cut the airline’s rating to BB+, which is below investment grade, citing the airline’s losses.
“A downgrade was not unexpected,” Qantas chief financial officer Gareth Evans said in a statement. “It highlights the unprecedented pressures that the Qantas Group is facing from several external forces but particularly from an uneven playing field in the Australian aviation market.”
Qantas is hoping that regulators will throw it a lifeline by easing restrictions that currently limit foreign ownership in the airline to 49 per cent. Rival airline Virgin Australia is not subject to the same restrictions.
On Thursday, Qantas said it expects to post pre-tax losses of between AU$250 million and AU$300 million for the six months ending Dec. 31, due to lower demand, a strong Australian dollar and steep fuel costs.
In a bid to save AU$2 billion over three years, the airline plans to axe at least 1,000 jobs within 12 months, freeze pay for all employees and cut the salaries of CEO Alan Joyce and other executives.
The news sent Qantas stock plummeting, with the price dropping 11.2 per cent on Thursday. Shares were down another 3 per cent on Friday afternoon.
A range of measures to help the airline have been considered. Earlier this year, Qantas attempted to boost its struggling international division by signing a 10-year partnership with Dubai-based rival Emirates.