Originally Posted by
angryrat
Franking credits are used when a company has paid tax, it’s a credit for tax that the company has paid, so what you write is incorrect. Management were only paying token dividends because there were no franking credits and shareholders had been whining about no dividends for a long time.
My apologies, I used the wrong term, but the strategy has been the same - pay dividends when the accumulated losses are providing a tax shield, which runs out this fiscal year. They've also done a heap of share buybacks to keep the investors happy, but both of those are can be put on ice if needed to invest in fleet. If they had to do it today, they would probably rely on the debt market to finance new jets as rates are still at historic lows, but they are a few years off from making a major decision on that.
Also, for the record, the S&P report was not as alarmist as some reckon it was. Have a read, they say that the fleet is fit for purpose now, but will require replacement later on, as all ageing aircraft do. They see some risk in that, but it's nothing that a competent management team cannot handle. Of course, the definition of competent varies from person to person.