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SYDNEY - Ratings agency Moody's Investor Service has downgraded its outlook for Qantas Airways Ltd due the carrier's high debt and strained profitability.
Moody's downgraded the long-term senior unsecured rating of Qantas from Baa1 to Baa2.
It said Qantas had about US$1.5 billion ($2.96 billion) in debt securities outstanding.
The agency also affirmed Qantas' Prime-2 short-term rating.
"The downgrade reflects deterioration in Qantas' credit profile over a period of time, which has significantly diminished the available cushion within the previous Baa1 rating," Moody's senior analyst Ian Lewis said.
"Qantas' credit profile has been adversely impacted by relatively high debt and strained profitability and cash flow, putting pressure on the rating at a time of worsening industry fundamentals."
Moody's said Qantas had taken a number of measures to mitigate these pressures including capacity reductions, reallocation of routes between Qantas and Jetstar, and the recent equity raising of $500 million.
"However, the sharp fall-off in consumer demand for air travel, as a result of the global economic crisis and which is to a large extent beyond Qantas' control, has outweighed the beneficial effect of these actions, placing material challenges that are more manageable at the Baa2 rating."
The agency said the outlook for the rating was stable.
- AAP
