Additional blow for Qantas as rating cut to junk by Moody's

Additional blow for Qantas as rating cut to junk by Moody's Qantas, the Australian carrier said it was facing some of its toughest-ever challenges on Thursday as Moody's downgraded its credit rating to junk, with the airline battling strong competition and increasing costs.

Moody's mentioned, "a sharp deterioration in the company's core domestic business" following the airline's shock profit warning and announcement of job cuts in December, which had already prompted Standard and Poor's to assign it junk status.

Qantas which is now rated Ba2 by Moody's and BB+ by Standard and Poor's, means it is considered a "junk" product by professional investors.

It will increase the cost of financing for the carrier and limit access for investors that do not put their money in lower-rated companies, intensifying woes for the cash-strapped airline.

The downgrades came after a dire forecast in December of a half-year loss of up to Aus$300 million (US$267 million) and the decision to cut down on 1,000 jobs due to "immense" cost burden. Gareth Evans, Qantas chief financial officer said the downgrade was not unexpected and underscored the difficulties faced by the company, which embrace record fuel costs and severe competition from domestic rival Virgin Australia.

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