Qantas to repay debts

The debt repayment will be partially funded by the Boeing 787 Dreamliner cancellation settlement

Qantas will repay AU$650 million (US$677m) of debt ahead of schedule, the company announced today.

The Australian airline revealed that it will repay of all outstanding 5.125% notes in January 2013 – five months ahead of schedule. This will form part of a programme that will see Qantas reduce its debts by AU$1bn in 2013.

The measures will be funded by the recently-completed sale of Qantas’ stake in road freight company StarTrack and the settlement from Boeing in relation to the cancellation of orders for 35 B787 Dreamliners. According to Qantas, these two transactions will deliver combined net proceeds of AU$750m in 2013, with the StarTrack deal reported to be worth AU$413m.

Meanwhile, Qantas is also planning to invest up to AU$100m buying back up to 4% of its shares. The group’s Chairman Leigh Clifford said the “progress towards the turnaround strategy for Qantas International, plus cash inflows from recent transactions” had allowed it to progress with the two capital management measures.

“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,” Clifford said.

“The board believes the current Qantas share price does not reflect fair value of the group, particularly considering the underlying strength of its domestic, loyalty and Jetstar businesses and the proposed partnership with Emirates,” he added.

Qantas made a pre-tax loss of AU$450m for its international operations in the 2011-12 financial year, although this was offset by a AU$600m domestic profit. It cancelled the delivery of 35 B787 Dreamliners in August this year.

By Mark Elliott, 15 November 2012, Thursday 7:18 AM