The bond ratings agency Standard & Poor's (S&P) has downgraded Qantas’ credit rating to below-investment level – otherwise known as “junk”.  It will probably increase the airline's borrowing costs and send a scare up the spines of investors.

S&P says it downgraded Qantas to a "BB+/B" rating because of the “view that intense competition in the airline industry has weakened Qantas' business risk profile to ‘fair’ from ‘satisfactory’, and financial risk profile to ‘significant’ from ‘intermediate`”.  It comes a day after Qantas announced it is slashing 1000 jobs (oh, and ‘Merry Christmas’) and warning it could post a $300 million loss in the first half of this year.

Qantas has been hurt by a range of factors in recent times including higher fuel costs, subdued global travel demand and increased competition.  Workers say the company’s heavy investment in Jetstar has sucked the venerable red-tailed carrier dry.  Management has gone on about laws limited foreign investment to 49 percent, with foreign airlines allowed to own just 35 percent.

Prime Minister Tony Abbott seems as willing to help Qantas as he is to help Holden – which is to say, “not”.  Abbott told ABC that Qantas had to “get its house in order,” and if the government had to help Qantas it would have to help other sectors of the Australian economy.

“And if we subsidise everyone,” Abbott said, “that's just a bottomless pit into which we will descend.”