* To repay A$650 mln in debt early, buy back A$100 mln in
* Says share price does not reflect value of company
* Expects H1 underlying pre-tax profit of A$180-A$230 mln
* No H2 outlook due to global economy, fuel prices, FX
* Shares rise 6.5 pct in weak market
(Adds detail, shares, comment)
SYDNEY, Nov 15 Australia's Qantas Airways
will repay A$650 million ($675 million) in debt ahead
of schedule and buy back up to A$100 million in shares, saying
the market is undervaluing the business after a slump in its
Qantas has been battling high fuel costs, tough competition
at home and a strong Australian dollar that has dented tourism
spending. It announced plans in September to tie up with Dubai's
Emirates to shore up its loss-making international
"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," Qantas
Chairman Leigh Clifford said in statement on Thursday.
In addition to the planned Emirates alliance, Qantas has
been cutting jobs, cancelling plane orders and selling non-core
assets to boost its balance sheet and reduce operating costs.
Qantas shares rose 6.5 percent to A$1.31 in a weak market in
early trade. The stock slumped to A$0.96 in June, the lowest
since privatisation in 1995 and down from above A$6 in 2007.
Some analysts were surprised to see Qantas' plan to buy back
"The balance sheet might be okay today, but it's the future
requirement for capital on the balance sheet which is still very
high," said Akshay Chopra, an investment analyst at Karara
"To buy back stocks today, it just seems bizarre really."
The carrier posted an annual net loss of A$244 million last
year, its first since being privatised.
Qantas said it expected to report an underlying profit
before tax for the six months ending 31 December 2012 in the
range of A$180 million to A$230 million, versus A$202 million a
"The outlook for the second half of FY13 remains volatile
and, given the uncertainty in global economic conditions, fuel
prices and foreign exchange rates, it is not possible to provide
further guidance at this time," Qantas said.
Analysts are expecting a pre-tax profit of A$385 million for
the year to end-June, 2013 according to the consensus forecast
from Thomson Reuters I/B/E/S.
Standard & Poor's cut its rating on Qantas to BBB-minus in
September. That is still investment grade, making Qantas one of
only two investment grade airlines in the world, along with
($1 = 0.9630 Australian dollars)
(Reporting by Lincoln Feast; Additional reporting by Maggie Lu
Yueyang in Canberra; Editing by Richard Pullin)