Stock in Australia’s Qantas Airways limited was downgraded to junk status by ratings agency Standard & Poor’s on Friday, after the company asked for trading in its shares to be halted pending the announcement.
The move comes a day after Qantas said losses in the second half of the year could reach 300 Australian dollars ($ 271 million), and that it would be shedding 1,000 of its 30,000 employees, sending its share price tumbling 11.2 per cent to 1.07 Australian dollars.
“Virgin Australia has become a more formidable competitor to Qantas,” Standard & Poor’s said in the note announcing its downgrade.
“These competitive pressures have eroded Qantas’ yield and threatened its strong and defendable position in its domestic market. In addition, high fuel costs and weak demand have exacerbated the impact.” Qantas asked the Australian stock exchange to halt trading on Friday ahead of the Standard & Poor’s announcement, saying it was “considered likely to be materially price sensitive.” Standard & Poor’s revised the airline’s credit rating from BBB-, the lowest investment-worthy grade, to BB+/B, and gave the company a negative outlook.
On Thursday, ratings agency Moody's also gave the airline a negative outlook, saying it may revise its own grading of it down from the current Baa3.
Trading in the shares was suspended until Monday. They have fallen 80 per cent in value over the past six years.