Qantas shares soar on financing deal as rivals cut more capacity

Qantas shares soar on financing deal as rivals cut more capacity

FILE PHOTO: Qantas aircraft are seen on the tarmac at Melbourne International Airport in Melbourne
FILE PHOTO: Qantas aircraft are seen on the tarmac at Melbourne International Airport in Melbourne, Australia, November 6, 2018. Picture taken November 6, 2018. REUTERS/Phil Noble/File Photo

SYDNEY: Qantas Airways on Wednesday (Mar 25) secured A$1.05 billion (US$627.8 million) against its aircraft fleet to help it ride out the coronavirus crisis, sending its shares soaring, as airlines in the Asia-Pacific region sliced away capacity and jobs.

Qantas raised the financing against seven of its Boeing 787-9s for up to 10 years at a 2.75 per cent interest rate, showing there is still low-cost funding available to airlines with strong fundamentals even as the global industry calls for more government aid to help replace an estimated US$250 billion of lost revenue in 2020.

"Over the past few years we've significantly strengthened our balance sheet and we're now able to draw on that strength under what are exceptional circumstances," Qantas Chief Executive Alan Joyce said in a statement.

READ: Airlines beg for rescue as coronavirus hit soars to US$250b

The airline's shares had their biggest intraday gain, rising as much as 31 per cent before closing 26 per cent higher. The broader Australian market was up 5.5 per cent.

Qantas has cut all international flights and put two-thirds of its 30,000 staff on leave but so far has maintained its investment-grade credit rating.

It is continuing with a costly programme to upgrade the interior of its grounded Airbus SE A380 super-jumbos, in an expression of confidence demand will eventually return to normal.

Other airlines in the region are also looking at ways to raise cash beyond government aid.

Korean Air Lines said on Wednesday it would seek to raise funds by selling non-core assets, as it announced a pay cut of up to 50 per cent for all of its executives.

Hong Kong's Cathay Pacific Airways Ltd this month sold six 777-300ERs to BOC Aviation Ltd for US$703.8 million and will lease them back.

Singapore Airlines said on Monday it was in talks with several financial institutions over future funding needs after having drawn on credit lines.

READ: SIA to implement COVID-19 cost-cutting measures, up to 7 days no-pay leave a month for pilots

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Cash-strapped Virgin Australia Holdings said on Wednesday it would stop 90 per cent of its domestic flying in addition to a freeze on international flights, and put 80 per cent of its 10,000 employees on leave.

Virgin is also looking to close its New Zealand cabin crew and pilot bases and its pilot base for low-cost arm Tigerair Australia in Melbourne, in a sign it would not return to business as usual when demand returns.

"We plan to return Tigerair Australia and Virgin Australia to the skies as soon as it is viable to do so. However, I am mindful that how we operate today may look different when we get to the other side of this crisis," Virgin Chief Executive Paul Scurrah said in a statement.

Air New Zealand, which plans to cut up to 30 per cent of its staff, has also warned it could re-emerge as a smaller airline once the coronavirus situation subsides.

The airline said it would operate some flights to Australia, Los Angeles, Hong Kong, Shanghai and Pacific Islands through the end of May, but 95 per cent of its international schedule had been cancelled.

Other Asian carriers have slashed capacity further, with Thai Airways International PCL on Tuesday cancelling nearly all international flights.

Japan Airlines plans to cut international flights from Japan by about 64 per cent between Mar 29 and Apr 30.

Boeing's chief financial officer has said "markets essentially are closed" to new debt for the aerospace industry.

READ: Boeing plans 737 MAX production restart by May - sources

READ: US Congress, negotiators reach deal on US$2 trillion COVID-19 aid package

US lawmakers are nearing agreement on a US$61 billion rescue package for the aviation sector that would include US$25 billion in payroll grants for passenger airlines, three people briefed on the matter said.

Data firm Cirium on Tuesday estimated the number of aircraft placed in storage since January had climbed about 40 per cent in a day to 3,500.

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Source: Reuters/jt

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