Qantas yesterday said it would accelerate A$650 million (US$675 million) in debt repayments and buy back A$100 million of shares in a bid to shore up its ailing stock and boost confidence.
The Australian airline’s chairman, Leigh Clifford, said the on-market buyback, which represents about 4 percent of total Qantas stock, and early debt repayment reflected the board’s confidence in the carrier’s improving fortunes.
“Our continued progress towards the turnaround strategy for Qantas International, plus cash inflows from recent transactions, gives the board confidence to approve these capital management measures,” Clifford said.
“The share buy-back and accelerated debt reduction reflect the board’s goal of returning value to shareholders and maintaining a strong balance sheet, as well as retaining the flexibility to pursue current growth initiatives,” he said.
The A$650 million debt repayment five months ahead of schedule was part of a A$1 billion debt reduction drive for the 2012 to 2013 fiscal year, Qantas added in a statement to the Australian Stock Exchange.
Both it and the share buyback would be funded by the recent sale of Qantas’ stake in freight company StarTrack and settlement from Boeing on its B787 order, which had brought US$750 million into the company’s coffers, it said.
Qantas stock closed up 4.07 percent at A$1.28 in a broadly lower market.
Clifford said the board believed the current share price “does not reflect fair value” given the recent sealing of a mammoth partnership with Emirates on its international routes and the strength of its domestic business.
The “Flying Kangaroo” hopes the 10-year tie-up with Emirates, unveiled in September, will boost its push into Asia and help stem losses at Qantas International — spun off earlier this year as a separate business.
Intense competition in the region, rocketing fuel costs and the strong Australian dollar saw Qantas post its first loss since privatization in 1995 back in August, plunging A$244 million into the red.
It was a significant reverse from a net profit of A$250 million a year earlier and prompted ratings agency Standard & Poor’s to downgrade the airline from “BBB” to “BBB-” due to what it described as “structural issues.”
Qantas said it would also slash capital expenditure by A$100 million to A$1.8 billion, forecasting underlying profit before tax of A$180 million to A$230 million for the six months to December, compared with A$202 million in the same period last year.