TEXT-S&P: Qantas ratings unaffected by Emirates partnership

Thu Dec 20, 2012 5:09pm EST

Dec 20 - Standard & Poor's Ratings Services said today that its
'BBB-/Stable/A-3' issuer credit rating on Qantas Airways Ltd. is
unaffected by the regulator's draft determination authorizing Qantas and
Emirates Airlines (not rated) to coordinate their operations for an initial
period of five years. While the final decision is not expected until March 2013,
the Australian Competition & Consumer Commission (ACCC) has indicated its
overall satisfaction that the public benefit from the airlines' partnership
outweighs any public detriment. 

We view the Qantas-Emirates partnership as positive from a credit perspective. 
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. 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. 

The rating on Qantas does 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. We also view favorably Qantas' existing initiatives to improve the 
return on its international operations.

AUSTRALIA
Standard & Poor's (Australia) Pty. Ltd. holds Australian financial services 
licence number 337565 under the Corporations Act 2001. Standard & Poor's 
credit ratings and related research are not intended for and must not be 
distributed to any person in Australia other than a wholesale client (as 
defined in Chapter 7 of the Corporations Act).
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