Sydney - Qantas Airways regained its investment-grade credit rating after Standard & Poor’s upgraded the airline’s score to BBB-, citing a strengthened balance sheet.
The ratings company said Qantas’s finances were “more formal, forward-looking, and preemptive, and should help to buffer the group against the earnings volatility inherent in the airline industry”. It raised the rating one notch from BB+.
Qantas Managing Director Alan Joyce’s cost-cutting turnaround plan in August delivered the airline’s strongest full-year earnings since he took over in 2008. Qantas, which this month returned A$505 million to shareholders, said on Tuesday it’s well placed to consider returning additional capital.
Qantas shares were up 3.7 percent to A$3.68, their highest level since October 29, as of 1.37pm in Sydney. The shares, which fetched as little as A$1.01 in December 2013, have risen 44 percent so far this year, compared to a 6.3 percent decline in the benchmark S&P/ASX200 index.
Qantas’s Australian dollar bonds surged, pushing yields down to their lowest level since September, relative to swap rates. The airline’s A$400 million of 7.5 percent notes due in June 2021 rose 96.4 cents to $109.07 per $100 face value, according to prices from Australian & New Zealand Banking Group. The yield premium over swaps shrank 17 basis points to 319.5 basis points.
S&P had downgraded Australia’s national carrier to junk status in December 2013.
BLOOMBERG