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Qantas shares soar after airline secures $1.05 billion in funding

'Over the past few years we've significantly strengthened our balance sheet and we're now able to draw on that strength under what are exceptional circumstances,’ said the Qantas CEO.

Debt funding secured

Qantas (ASX: QAN) today announced that it has secured a new round of debt funding valued at $1.05 billion.

With interest rates at historical lows and Qantas facing significant pressure as a result of Government imposed travel bans, today’s debt funding announcement is hardly a surprising one.

Looking at the specifics, it was noted that the ‘debt has been secured against part of the Group's fleet of unencumbered aircraft, which were brought with cash in recent years.’

‘The loan has a tenure of up to 10 years at an interest rate of 2.75%.’

All up, by securing this new round of funding the blue-chip airline’s cash position has been significantly strengthened, with Qantas now touting an available cash balance of $2.95 billion.

Other capital preservation initiatives that the airline has employed recently, include delaying its dividend from April to September – a move that is set to see $201 million in cash preserved. The company also announced that it would cancel its previously revealed off-market share buyback plan.

In general, Airline companies have come under fire in recent weeks for their aggressive share buyback programs.

Finally, commenting on today’s announcement, Qantas CEO Alan Joyce said:

'Over the past few years we've significantly strengthened our balance sheet and we're now able to draw on that strength under what are exceptional circumstances.’

Further to that, Mr Joyce noted that:

‘Everything we're doing at the moment is focused on guaranteeing the long term future of the national carrier, including making sure our people have jobs to returns to when we have work for them again.'

Qantas share price in focus

Investors reacted positively to news that Qantas would be shoring up its liquidity position through the use of debt funding, with its stock being bid as much as 30.89% higher in the first 30-minutes of trade, to $3.39 per share.

These bullish moves were likely boosted by general market optimism, with the ASX 200 benchmark also rising strongly, up 3.55% or 168 points a little before noon.

How to trade Qantas

Can this rally last or will it be short-lived? Trade accordingly. You can use CFDs to trade Qantas and other airline and travel stocks – LONG or SHORT through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) Qantas, follow these easy steps:

  • Create an IG Trading Account or log in to your existing account
  • Enter ‘QAN’ or ‘Qantas’ in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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