CDS traders await clarity on Qantas aid

[SYDNEY] Default-risk prices suggest traders are reserving judgment on how Australia's government will play the "political football" of aid for Qantas Airways Ltd.

Credit default swaps (CDS) on the nation's biggest airline rose 81 basis points between its forecast of a first-half loss on Dec 5 and Australian Treasurer Joe Hockey saying on Feb 13 that Qantas may be entitled to government support. They've since fallen 20 basis points to 255 on Monday, still the most expensive on the iTraxx benchmark of Australian corporate debtors and 61 basis points above British Airways plc.

Qantas may be a special case for a government opposed to "corporate welfare", Mr Hockey said, because it's crucial to the economy and the largest shareholders in rival Virgin Australia Holdings are state-controlled competitors. The 93-year-old airline needs debt to pay for planes and other capital over the year to June, Qantas said on Dec 5 as it announced plans to cut 1,000 jobs and A$2 billion (S$2.3 billion) in costs.