(MENAFN - AFP) Qantas said Thursday it would accelerate Aus650 million (US675 million) in debt repayments and buy back shares worth Aus100 million in a bid to shore up its ailing stock and boost confidence.
The Australian airline's chairman Leigh Clifford said the on-market buyback, which represents about four percent of total Qantas stock, and early debt repayment reflected the board's confidence in the carrier's improving fortunes.
"Our continued progress towards the turnaround strategy for Qantas International, plus cash inflows from recent transactions, gives the board confidence to approve these capital management measures," Clifford said.
"The share buy-back and accelerated debt reduction reflect the board's goal of returning value to shareholders and maintaining a strong balance sheet, as well as retaining the flexibility to pursue current growth initiatives."
The Aus650 million debt repayment five months ahead of schedule was part of a Aus1 billion debt reduction drive for the 2012-13 financial year, Qantas added in a statement to the Australian stock exchange.
Both it and the share buyback would be funded by the recent sale of Qantas's stake in freight company StarTrack and settlement from Boeing on its B787 order, which had brought 750 million into the company's coffers, it said.
Qantas stock jumped 6.5 percent on the announcement to Aus1.31 in early trade.
Clifford said the board believed the current share price "does not reflect fair value" given the recent sealing of a mammoth partnership with Emirates on its international routes and strength of its domestic business.
The "Flying Kangaroo" hopes the 10-year tie-up with Emirates, unveiled in September, will boost its push into Asia and help stem losses at Qantas International -- spun off earlier this year as a separate business.
Intense competition in the region, rocketing fuel costs and the strong Australian dollar saw Qantas post its first loss since privatisation in 1995 back in August, plunging Aus244 million into the red.
It was a significant reverse from a net profit of Aus250 million a year earlier, and prompted ratings agency Standard and Poor's to downgrade the airline from BBB to BBB- due to what it described as "structural issues".
Qantas said it would also slash capital expenditure by Aus100 million to Aus1.8 billion, forecasting underlying profit before tax of Aus180-230 million for the six months to December, comparable to Aus202 million in the same period last year.
It added that the "outlook for the second half of FY13 remains volatile and, given the uncertainty in global economic conditions, fuel prices and foreign exchange rates it is not possible to provide further guidance at this time".