A second international credit ratings agency has downgraded Qantas to junk status after the airline said it expected to post a loss for the first half of the year.

Moody's Investors Service has lowered its rating for Qantas from Baa3 to Ba2 with a negative rating, meaning it could downgrade the rating further.

Last month, Standard and Poor's downgraded its rating for the airline to BB+, which is also junk status.

Qantas says it was not surprised by the move.

In a statement, Moody’s senior Vice President Ian Lewis says the downgrade reflects the sharp deterioration of the airline's core domestic business, which has previously underpinned its investment grade rating.

"As a consequence, we expect these conditions to exacerbate an already high financial leverage," Mr Lewis said.

Qantas chief financial officer Gareth Evans says the airline is speeding up its cost cutting program to improve its financial position.

Analysis: Divide Qantas to fix ‘broken’ model Aviation analyst Neil Hansford says splitting Qantas into three subsidiary groups would be more effective than an increase in foreign ownership.

Aviation analyst Neil Hansford says splitting Qantas into three subsidiary groups would be more effective than an increase in foreign ownership. He says Qantas is facing a marketing problem, and Australians need to put their money where their mouths are, or let the airline go.

"In addition to cost-cutting, substantial reductions to our planned capital expenditure pipeline will be vital to ensure a return to positive free cash flow in financial year '15 and beyond," Mr Evans said.

"The group has made significant progress over the past two years to reduce costs and increase competitiveness, as part of Qantas's biggest transformation since privatisation."

Qantas is still in talks with the Federal Government about resolving what it calls the "uneven playing field" that limits foreign ownership of Qantas to 49 per cent, while its major rival Virgin Australia faces no such restriction.

The third major international ratings agency, Fitch Ratings, does not rate Qantas.

Qantas shares initially traded slightly lower, but by 12:24pm (AEDT) were up 2 cents to $1.12.