This is a poor use of the company's capital, since the global economy remains weak and since Qantas faces intense competition on numerous fronts. While increasing the debt component of the capital structure would lower the overall cost of capital, it would also increase the risk that the company faces. The operating environment is turbulent, not just from competition but from high fuel costs as well. This implies that any additional risk would compromise the security that Qantas currently has with respect to meeting its debt service obligations. While Qantas' balance sheet looks remarkably unchanged as the result of the global economic crisis, this is only because of the proactive measures the company took at the outset of the crisis. The equity issue allowed the company to maintain its capital structure at a time when profits (and therefore retained earnings) were declining sharply. The company also made a number of tactical operational moves that helped it weather the crisis. When the airline business was stronger in the mid-00s, it invested heavily in Jetstar and that unit propped up the flagship brand, which suffered as its international routes saw declines in demand. The response of the company to the crisis was excellent, and in light of that and the current operating environment there is no need at all to alter the capital structure of Qantas.

Works Cited:

de Bruyn, C. (2009). Global airline industry to suffer $4.7 billion loss this year. Engineering News. Retrieved October 9, 2011 from http://www.engineeringnews.co.za/article/global-airline-industry-to-suffer-47bn-loss-this-year-iata-2009-03-24

(2009). The global financial crisis and its impact on the Australian economy. ANZ Bank. Retrieved October 9, 2011 from http://www.anz.com/singapore/en/resources/f/9/f9da17804d6914aa9fa09f17f89c601a/Saul-Eslake-Presentation-Singapore-Mar-2009-en.pdf?CACHEID=8b6320004d66a42f9899f9aabbf9c43a
Ghosh, P. (2010). Global airline industry poised to soar in coming decades. International Business Times. Retrieved October 9, 2011 from http://www.ibtimes.com/articles/63951/20100920/airlines-recession-pilots-boeing.htm

Govindasamy, S. (2009). Qantas cuts to tackle crisis. Airline Business. Retrieved October 9, 2011 from http://www.flightglobal.com/news/articles/qantas-cuts-to-tackle-crisis-325425/

Loth, R. (2006). Evaluating a company's capital structure. Investopedia. Retrieved October 9, 2011 from http://www.investopedia.com/articles/basics/06/capitalstructure.asp

No author. (2009). Qantas profit sinks 87%, Jetstar keeps group afloat. Travel Blackboard Australia. Retrieved October 9, 2011 from http://www.etravelblackboard.com/showarticle.asp?id=96008

Qantas 2007 Annual Report. Retrieved October 9, 2011 from http://www.qantas.com.au/infodetail/about/investors/2007AnnualReport.pdf

Qantas 2010 Annual Report. Retrieved October 9, 2011 from http://www.qantas.com.au/infodetail/about/investors/2010AnnualReport.pdf

Smith, P. (2009). Qantas plans A$500m share issue. Financial Times. Retrieved October 9, 2011 from http://cachef.ft.com/cms/s/0/31b69c80-f224-11dd-9678-0000779fd2ac.html