Qantas Plans First Buyback Since 2008 Using Boeing Payout

Qantas Minds Bonds as Dreamliner Order Pulled
Qantas Airways Ltd. aircrafts stand on the tarmac at Sydney International Airport. Photographer: Sergio Dionisio/Bloomberg

Qantas Airways Ltd., Australia’s largest carrier, rose the most in more than two months after saying it would buy as much as A$100 million ($104 million) of its own shares with cash from cutting a Boeing Co. order.

The airline will repurchase as much as 4 percent of its stock from December and has hired Citigroup Inc. to broker the transaction, according to a regulatory statement today. That will be Qantas’s first share buyback in more than four years, according to data compiled by Bloomberg. Qantas will also repay A$650 million of debt early, including redeeming its 5.125 percent June 2013 bonds five months before they mature, it said.

“The current Qantas share price does not reflect fair value of the group,” Leigh Clifford, Qantas’s chairman, said in the statement.

Qantas shares rose 4.1 percent to close at A$1.28 in Sydney, their biggest gain since Sept. 7. The stock has climbed 32 percent from a record low reached June 8 after Alan Joyce, chief executive officer, forecast the Sydney-based company would post its first loss since listing in 1995.

It has since announced a partnership with Emirates to turn around international losses, canceled an order for 35 Boeing 787 Dreamliners, and quit a parcel delivery joint venture with Australia Post, the country’s government-owned mail service.

A settlement with Boeing and the sale of Qantas’s stake in the road freight venture will deliver net proceeds of A$750 million this financial year, which Qantas will use to fund the share buyback and debt reduction, the airline said today.

Underlying profit in the six months through December will be between A$180 million and A$230 million, the company said. Capital spending during the year, previously forecast at A$1.9 billion, will be reduced by a further A$100 million.

The outlook for the full year “remains volatile”, the company said, saying it was unable to provide further guidance at present.

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