S&P says Emirates deal no 'panacea' for Qantas

Rating agency leaves ratings on Australian carrier unchanged despite preliminary approval

(AFP/Getty Images)

(AFP/Getty Images)

Standard & Poor's has said it will not upgrade ratings on Australian carrier Qantas on the back of news that its planned alliance with Dubai's Emirates Airline has received preliminary approval from regulators.

The rating agency said that its 'BBB-/Stable/A-3' issuer credit rating on Qantas was unaffected by the the Australian Competition and Consumer Commission's draft determination authorising the two airlines to coordinate their operations for an initial period of five years.

S&P said that while it viewed the Qantas-Emirates partnership as "positive from a credit perspective", it would not act as a "panacea" to the carrier's problems.

"The wide-ranging agreement substantially addresses the declining market share and profitability of Qantas' European network and allows Qantas to more appropriately service its Asian network," S&P said.

"Nevertheless, we do not view the partnership as a panacea. The challenges facing Qantas are largely structural and the partnership does not diminish Qantas' need to pursue an independent long-term strategy to manage its cost base," it added.

While the final decision is not expected until March, the Australian Competition & Consumer Commission has indicated its overall satisfaction that the public benefit from the airlines' partnership outweighs any public detriment.

S&P also said its rating on Qantas did not depend on final regulatory approval of the partnership.

"Should the draft determination be overturned, we view Qantas as having sufficient flexibility within its current rating to pursue alternate strategies," it said.

Qantas announced the Emirates deal in September, ending its 17-year alliance with British Airways, owned by IAG, which some analysts have suggested could seek a new partner such as Qatar Airways.

The alliance is deeper than a straightforward code-share arrangement - where airlines share some flights - but stops short of a global revenue-sharing deal or equity injection from either side.

Related:
Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

Please post responsibly. Commenter Rules

  • No comments yet, be the first!

All comments are subject to approval before appearing

Further reading

Features & Analysis
After all the hype, what's the future for Hyperloop One

After all the hype, what's the future for Hyperloop One

Los Angeles-based Hyperloop One may have struck a deal this month...

1
Focus: Gulf airlines face looming growth threat from 'protectionist' Trump government

Focus: Gulf airlines face looming growth threat from 'protectionist' Trump government

Election of Donald Trump, one-time owner of now-defunct East...

3
Smart move: Automated transport in the Gulf

Smart move: Automated transport in the Gulf

In a few short years how we get from A to B will be dramatically...

1
Most Discussed
sponsoredTracking