Australian airline Qantas has had its credit rating downgraded to 'junk'- below the lowest investment grade- by credit rating agency Standard & Poor's.
The move comes after the troubled carrier set out drastic plans to axe 1,000 jobs, freeze pay, stop bonuses, and cut the salaries of its boss and board members, after the Australian airline issued a profit warning and signalled that it faces “immense” challenges.
The flag-carrier also criticised what it claims is unfair competition from Sir Richard Branson’s Virgin Australia.
As Qantas warned it will post half-year losses of up to A$300m (£166m) for the second half of this year, chief executive Alan Joyce complained: “Since early 2012, there has been an unprecedented distortion of the Australian domestic market, with Virgin Australia’s strategy to seek majority ownership and massive financial backing from foreign government-owned airlines.”
Virgin Australia’s three major shareholders include Air New Zealand (53 per cent-owned by the New Zealand government), Singapore Airlines (also majority-owned by a state investment company) and Etihad (fully owned by the government of the United Arab Emirates).
They injected A$300m into the airline last month to accelerate growth, which Joyce said was “designed to weaken Qantas”.
He added: “This foreign government capital has been used to finance dramatic increases in domestic capacity, with profound implications for the future of Australia’s aviation industry. ”
Current Australian ownership rules limit total foreign holding of Qantas to 49 per cent, with foreign airlines allowed to own just 35 per cent. Qantas claims those rules have damaged its growth.
Just this week, however, Branson claimed: “If Qantas were better managed and offered the public a decent service it would not now be in the financial mess it claims it is. It seems strange to me that a Liberal government would even consider tilting the playing field once again in Qantas’s favour.”