S&P says Qantas result underpins ratings

By NZPA

Monday 24th February 2003

Qantas' credit ratings remain unchanged after its first half results released last week, despite a gloomy outlook for the international airline industry.

Standard & Poor's said in a statement today that Qantas' "robust" result was in line with expectations and underpinned the airline's BBB + ratings.

"The next few months, however, will probably be very challenging for the airline industry, with the threat of military conflict in Iraq and increased terrorism concerns," the agency said.

"Already under relentless pressure to reduce its cost base from low-cost competition domestically and overcapacity globally, Qantas has announced further capacity and cost reduction measures to mitigate the `war-related' softening that has recently emerged in the forward bookings on some of its international routes."

Qantas was looking to remove $A1 billion in costs over the next three years, including the reduction of 1500 full time jobs.

Australia's biggest airline lifted its first-half net profit 130 percent to $A352.5 million due to stronger international routes and a solid domestic performance.

Qantas' cash flows and credit quality were vulnerable to prolonged industry weakness given the airline's large capital programme and debt burden, although it was in a better position than most airlines to weather adverse market conditions.

After being sold down following the result last week, Qantas shares last traded up 7c at $A3.46.

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