The Qantas Group will repay Australian dollars (A$) 650 million ($674 million) in debt ahead of schedule and will buy back about 4% of its shares for up to A$100 million from December in a move to strengthen its dwindling share price.
"The board believes the current Qantas share price does not reflect fair value of the group, particularly considering the underlying strength of its domestic, loyalty and Jetstar businesses, and the proposed partnership with Emirates," says Qantas's chairman Leigh Clifford.
The accelerated debt reduction involves repayment of all outstanding 5.13% notes originally due in June 2013. The airline will repay the debt in January 2013, five months ahead of schedule. This will be part of the A$1 billion debt reduction programme for the group in fiscal year 2013.
Qantas will fund these measures from the money it receives from the sale of its stake in road freight company StarTrack and the settlement from Boeing in relation to the group's 787 order. The two deals will deliver a total of A$750 million in FY2013 to Qantas.
The airline says following the recent refinancing of the group's A$400 million undrawn loan facility and its strong cash balance, it will retain a strong liquidity position on an ongoing basis.
Citigroup Global Markets Australia will act as broker for the buyback, it adds.