Qantas faces a further increase in its borrowing costs after Moody’s downgraded its credit rating to "junk" status, just weeks after Standard and Poor’s took the same action.
Moody’s cited "a sharp deterioration in the company’s core domestic business" following the airline issuing a shock profit warning and slashing jobs in December.
In cutting Qantas’s rating to Ba2, or junk status, from Baa3, Moody’s senior vice-president Ian Lewis blamed aggressive competition from domestic rival Virgin Australia.
"The downgrade to Ba2 reflects a worse-than-expected impact on Qantas’s credit profile of a marked sharp deterioration in the company’s core domestic business, which has been a key supporting factor of its previous investment-grade rating.
”Qantas’ domestic business will remain challenged as Virgin’s actions, and Qantas’ response to maintain market share, continue to pressure yield,” he said.
