Qantas to cut debt and buyback shares in restructuring

15 Nov 2012

The prospect of Qantas cutting its debt by $650 million and engaging in a limited share buyback has been welcomed by shareholders who have had their more than their fair share of downbeat news. This was  reflected in a 7 per cent surge  in the share price.

The capital restructuring provides a sense to the market that Qantas had sufficient confidence in its strategy to revive earnings and that it would not require cash from the sale of freight company Star Track as a buffer against lean times.

In other words the company was confident that its efforts to fix the international business would gain traction and the tie-up with Emirates, which gave Qantas the use of a phantom network,  is widely regarded as a step in the right direction from a financial perspective.

The company's financial update today, however presented no clear evidence that  there had been any stemming of the losses from Qantas's international mainline operations, according to analysts.

Qantas boss Alan Joyce told the market that the current half would see underlying profit range between $180 million and $230 million. The figure includes $130 million payment from aircraft manufacturer Boeing

According to the company, group yield was expected to be lower this half than in the first half of the 2011-12 financial year largely due to the increased capacity in the domestic market.