Govt talks down Qantas aid

Coalition distances itself from guarantee, airline's credit rating under review.

The federal government has talked down the prospects of coming to the direct aid of Qantas, after the airline announced the axing of 1000 jobs and flagged further cost cuts. The national carrier is also at risk of a downgrade to its credit rating.

Qantas chief Alan Joyce has forecast a six-month loss of up to $300 million, which he blamed on the strong Australian dollar, high fuel costs and Virgin Australia "distorting" the market.

Mr Joyce, who is facing calls from Labor and crossbench MPs for his sacking, said the company had done its best to cut costs and improve productivity.

His $3 million pay will be cut by at least 38% this financial year, but he says he continues to have the backing of the board. "Government action will be key in enabling us to keep competing effectively on a level-playing field," he said on Thursday.

The Qantas chief is talking with the government about additional policy measures but is yet to make a formal proposal.

Qantas also wants to ensure its key domestic competitor Virgin Australia doesn't "have the benefits conferred by an Australian carrier designation" while having only 20% Australian ownership.

Qantas has floated the idea of a Foreign Investment Review Board review of Virgin's use of foreign capital injections to "prolong anti-competitive action" in the Australian market.

Transport Minister Warren Truss said Qantas was a strong airline with a good future and its cuts were entirely appropriate as it restructured to be more competitive.

He appeared to rule out providing a loan or financial guarantee to Qantas.

"The government isn't a banker," he said.

As well, any change to the Qantas Sale Act - which keeps the airline in majority Australian hands - would be a waste of time and political energy because it would be opposed by Labor and the Greens.

The best thing the government could do was to improve the business environment, Mr Truss said.

Opposition Leader Bill Shorten said in the short-term the government needed to help Qantas staff who were about to lose their jobs in the lead-up to Christmas.

Labor wouldn't agree to scrapping Qantas' majority-Australian status, he said.

"We will work with the government as they investigate long-term solutions to some of the structural market challenges that Qantas faces," Mr Shorten said.

Virgin Australia chief John Borghetti said any government support given to Qantas should also be extended to his airline.

He returned fire on Qantas, calling for the government to investigate its "anti-competitive" strategy of maintaining a 65% share of the domestic aviation market.

ACTU secretary Dave Oliver said the government should act to save Qantas jobs.

Sparks flew in federal parliament when Environment Minister Greg Hunt said the former Labor government's carbon tax was behind Qantas' woes.

"I spoke to Alan Joyce an hour ago. The carbon tax has nothing to do with it. Stop politicising job losses. Shame on you," Mr Shorten shouted across the chamber.

Independent senator Nick Xenophon was joined by Labor senators Glenn Sterle and Alex Gallacher calling for Mr Joyce and the Qantas board to resign.

"What we've seen is an airline that has lurched from crisis to crisis, failed strategy one after another," Senator Xenophon said.

And Transport Workers Union national secretary Tony Sheldon blamed poor management for the job losses.

But industry analysts say Qantas is facing a series of complex industry problems that have not been caused by management.

Credit downgrade risk

Moody's, meanwhile, has flagged a possible downgrading of Qantas's credit rating on news of the airline's latest profit forecasts.

The ratings agency said a review of the Qantas' credit rating was also prompted by the airline's "accelerated cost reductions and a capital expenditure and structural review in response to deteriorating market conditions".

Moody's said the review was with a view to a possible downgrade of the airline's Baa3 rating.

"The rating action reflects the material downward pressure on Qantas's credit metrics due to declining yields," Moody's vice president, Arnon Musiker, said in a statement.

"While the Baa3 rating reflected these conditions, the extent of the announced profit downgrade, and the potential impact on the 2014 full year performance, is outside the rating expectation."

Mr Musiker added that the "challenging operating conditions" could mean Qantas' credit profile was no longer "consistent with the current ratings".

Qantas is Australia's largest domestic carrier, with an estimated total domestic market of 66%.

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