Qantas sells StarTrack freight stake to Australia Post

QANTAS has sold its StarTrack freight business to partner Australia Post, generating $413m to help ease balance sheet pressure.

Freight

QANTAS has sold its 50 per cent holding in freight business StarTrack to partner Australia Post, generating $413 million for the airline as it seeks to ease pressure on its balance sheet.

Qantas is selling assets it doesn't consider vital to its business and cancelling aircraft orders to try and hold on to its investment-grade credit rating. Although its domestic flights unit is performing solidly, high fuel costs, a fragile global economy and intense competition are damaging its international unit and crimping operating cash flow.

"This just continues to add good news to our funding position and good news for the rating agencies," Qantas chief executive Alan Joyce told reporters.

Standard & Poor's Ratings Services last month cut its rating on Qantas to one notch above junk status, with a stable outlook, bringing it in line with Qantas's rating from Moody's Investors Service. It warned that risks for the wider aviation industry are increasing due to intensifying competition, including from Asian carriers with lower cost bases that are aggressively boosting capacity.

Qantas has saved money by cancelling orders for Boeing's long-delayed fuel-efficient 787 and Airbus's A380 superjumbo. It has also sold some catering operations, cut close to 3,000 jobs, and agreed to form a global alliance with Emirates Airline to lower costs in its ailing international business.

Qantas shares rose 2.5 per cent in early trading, outperforming a 0.5 per cent rise in the wider S&P/ASX 200 as investors welcomed the move.

As part of the deal, Qantas will take full control of the separate Australian Air Express air freight joint venture that's currently split equally between the two companies.

The airline said it expected to receive net proceeds of $408 million plus an extra $5 million after the deal is completed, generating a profit for the company of about $30 million.

Mr Joyce said the deal would allow the companies to explore potential cost savings in the separate businesses.

He declined to foreshadow any job losses, saying more announcements would be made early next year.

StarTrack was the biggest non-core asset that Qantas could sell, Mr Joyce said. "There's some other non-core assets that we'll continue to look at but there's nothing of the scale of this."

At June 30, Qantas had a cash balance of $3.4 billion and was cash flow positive in the six months to June 30 by $206 million. Net debt including off balance sheet debt was $7.54 billion.