Qantas Shares Crash as Virgin’s Options Take Flight

http://blogs.wsj.com/dealjournalaustralia/2012/06/05/qantas-shares-crash-as-virgins-options-take-flight/

Australia’s Qantas Airways crashed to a record low of A$1.14 a share before closing down 19% at A$1.15 a share after the airline downgraded full-year earnings by up to 91%.

Following the downgrade, Macquarie equities analysts told clients the airline might need to raise capital if the European and U.S. economies weaken further.

Agence France-Presse/Getty Images
Qantas planes on the tarmac at Sydney International Airport in June 2011.

“Management reiterated that the balance sheet was structurally sound with over A$3 billion of cash against about A$6 billion in on-balance sheet debt, further highlighting that operating cashflows have held up relatively well in the current environment,” the broker says. “The weakness in the yields, specifically international inbound, shows a clear weakness stemming from a soft European, and to some extent, U.S. economy. Were this to worsen, the international business would be put under further pressure and the risk of a capital raising would rise, in our view.”

 

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