Moody's mulls Qantas downgrade after grounding

SYDNEY: International ratings agency Moody's Investors Services warned Qantas Airways Monday it was considering downgrading the airline over its decision to ground its fleet amid a bitter labour dispute.

Moody's said the shock grounding and an ongoing row with unions "are likely to place pressure on the airline's forward bookings, profitability and longer-term brand equity".

While Qantas resumed flights Monday after the 44-hour shutdown, Moody's noted the action was likely to "have longer term implications for Qantas' brand and reputation".

It said Qantas already faced a challenging operating environment, with incremental earnings losses and reduced forward bookings in the wake of the grounding set to exert additional pressure on its credit rating.

The agency said Qantas's current Baa2 may no longer be appropriate.

"The review was prompted by the weekend grounding of Qantas's fleet and other industrial relations actions over the weekend which are likely to place pressure on the airline's forward bookings, profitability and longer-term brand equity," it said in a statement.

Copyright AFP (Agence France-Presse), 2011