Qantas joins record airline rush to issue debt amid pandemic

Qantas Airways Ltd. is marketing an Australian dollar bond, joining a record global wave of airline debt issuance to build up cash buffers as the Covid-19 pandemic pummels air travel.

The Australian airline is looking to price a 10-year note at an indicative coupon of around 5.25%, according to a person familiar with the matter who asked not to be identified because he isn’t authorized to speak about it. That compared with a coupon of 2.95% on similar-tenor Australian currency debt issued in November last year, according to data compiled by Bloomberg.

Carriers across the globe have already broken the record for annual bond sales, raising an equivalent of $51.6 billion via notes excluding convertible debt so far in 2020, according to data compiled by Bloomberg.

The note issuance by Qantas comes as the company looks to cut costs and raise cash to survive in an industry that is among the worst-hit by the coronavirus crisis. It follows a dismal response to a fundraising attempt in the stock market earlier this month, when the carrier’s A$500 million ($368 million) equity issuance plan garnered only about A$72 million.

Still, the debt issue has a higher chance of sailing through as Qantas has strong domestic operations, is expected to increase its local market share with rival Virgin Australia Holdings Ltd. struggling to get back on track and a robust loyalty program that continues to grow, according to Bloomberg Intelligence analyst James Teo.

“Qantas won’t face any difficulty in raising money through the debt market, albeit investors may demand a higher coupon than earlier or there may be some covenants on the issuance,” Teo said. “The airline has enough cash to last about two years and investors very well know that.”

The company has so far announced as many as 8,500 job cuts and last Monday scrapped the executive role overseeing international services because those flights will be grounded for at least another year.