SYDNEY - Australia's prime minister Tony Abbott spurned a plea for help from Qantas Airways Ltd on Friday, saying subsidising the embattled airline would be "a bottomless pit" as its credit rating was relegated to junk status.
The downgrade by Standard & Poor's followed a shock loss warning from the carrier on Thursday that sent its shares plummeting to their biggest one-day loss in almost 18 months. Moody's also said it may cut its rating on Qantas below investment grade.
Abbott's comments suggested Chief Executive Alan Joyce had cut little ice with calls to government ministers on Thursday seeking urgent action to assist Qantas, claiming its aggressive rival Virgin Australia Holdings has an unfair advantage.
"The point I make is that if we subsidise Qantas, why not subsidise everyone?" Abbott said in an interview on Melbourne radio station 3AW. "If we subsidise everyone, that's just a bottomless pit into which we will descend."
The Australian flag carrier had been one just four airlines with investment grade ratings from Moody's or S&P. The remaining three are Deutsche Lufthansa AG, Air New Zealand and Southwest Airlines Co.
S&P's move to cut its main rating on the carrier to BB+, one rank below investment grade, could make it harder for debt-loaded Qantas to borrow funds. The airline could also lose some shareholders whose rules on investment prevent them from retaining stock in companies rated at junk level.
Qantas warned on Thursday it expects a pre-tax first-half loss of between A$250 million and A$300 million in the six months to December 31. S&P said that warning caused the carrier's financial risk profile to deteriorate, adding it may cut Qantas's rating again.
The airline has long complained that Virgin Australia's access to foreign funding, via its major shareholders Gulf carrier Etihad, Singapore Airlines and Air New Zealand, has created an unfair playing field.
Qantas CEO Joyce had hinted that subsidies would help, while analysts had speculated the government might consider a share purchase. Though formerly state-owned, the government owns no shares in the carrier now.
"In the end businesses have to operate profitably, and in the end they have to operate profitably because of their own decisions and from their own resources," Abbott said. "They can't expect government to do anything other than create the best possible market conditions for them to operate."