Qantas hits rock bottom

Qantas shares hit rock bottom

Qantas shares have slumped below AUD$1.00 (NZD$1.29) capping a horror week in which AUD$1.1 billion was wiped off the airline's market value.

TVNZ,

8 June, 2012

The dramatic slide follows the airline's shock profit warning on Tuesday, caused by the drastic deterioration in the performance of its international business.

Before that warning, Qantas shares were trading at AUD$1.42, but have since lost ground each day, setting new records in the process, to end Friday's session at AUD0.97 cents.

It's a far cry from the AUD$1.90 Qantas shares were worth 12 months ago, and the AUD$5.91 peak they hit in October 2007.

Qantas expects its international business to post a loss of AUD$450 million in the 2011/12 financial year, more than double the AUD$216 million loss in the prior year.

The overall company's full year profit is forecast be between AUD$50 million and AUD$100 million, down by as much as 91% from the AUD$552 million achieved in the previous year.

Credit ratings agency Standard & Poor's on Friday reacted to the airline's renewed outlook, placing the company on credit watch with the potential of a downgrade.

If the airline's international business does not improve earnings in a reasonable timeframe, Qantas' risk profile would weaken, Standard & Poor's said.

"In our view, Qantas' international operations are a key factor to the group's long term competitiveness," S&P credit analyst May Zhong said in a statement.

If S&P were to downgrade the airline's credit rating, it would likely be by one notch from its current BBB rating, the agency said.

Qantas recently announced plans to split its domestic and international businesses into separate companies, which fuelled speculation one may be sold off.

The drastic drop in the value of Qantas will only add to such speculation.