Tuesday 18 October 2016 by William Arnold Trade opportunities

New Qantas and Virgin Australia DirectBonds take off

Qantas and Virgin Australia have issued new bonds into the AUD and USD markets respectively

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Qantas retains a dominant position in the Australian domestic airline sector with a market share of circa 65% across both its Qantas and Jetstar brands. The company has regained its investment grade credit rating due to improved performance and the adoption of a more conservative financial framework.

The Qantas bonds, issued by Australia’s flagship domestic airline, suit investors looking for an investment grade exposure, albeit the lowest notching. The 2020, 2021 and the 2022 are available to retail clients, while the newly issued 2023 and 2026 bonds are available to wholesale clients only.

Factsheets for each of the five bonds can be found here.External link - opens in a new window The yields to maturity are illustrated below.


Source: FIIG Securities

Virgin Australia Holdings Ltd (‘Virgin’) is Australia’s second largest airline. Virgin is 70% owned by three major international airlines; Air New Zealand, Singapore Airlines and Etihad.  All these compete with Qantas on international routes so it is in their interest that Virgin remains a viable alternative to Qantas in the domestic market.

The Virgin bonds suits investors with a higher risk appetite. Virgin has a relatively weak credit rating, reflecting the very high leverage of the business. The two available Virgin bonds are USD denominated and are available to wholesale clients only.

Factsheets for the 2019 and the 2021 are available hereExternal link - opens in a new window and hereExternal link - opens in a new window. The yields to maturity are illustrated below.


Source: FIIG Securities

Pricing is accurate as at 18 October 2016 but subject to change.

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