Qantas's credit rating has been downgraded to junk status by Moody's - the second agency to do so. THE pressure on Qantas Airways and the federal government to fix the airline's woes have been ramped up with a second credit rating downgrade in a month. The national carrier faces a $100 million jump in interest payments on debt after Moody's downgraded Qantas' credit rating to junk status. The move casts doubt on the airline's ability to repay about $US737 million ($A829.39 million) in affected debt, and lowers Qantas' rating by two notches to a below investment grade Ba2 with a negative outlook. However, the company's shares closed 2.0 cents, or 1.82 per cent, higher at $1.12, in what was viewed as a sign that shareholders believed the government would act. Federal Liberal MP Dan Tehan went beyond the government's public comments on Wednesday promoting a lifting of the foreign ownership caps to help Qantas. Labor rejected that, calling for public investment instead. Either change would have to be passed by parliament. A junk rating is a signal to many investors not to buy the stock, while also lifting the costs of leasing aircraft and hedging, and forcing delays in booking sales to a balance sheet. That will restrict Qantas' ability to invest and compete with rival Virgin Australia. Moody's attributed its move to a surprisingly sharp deterioration in the airline's core domestic business due to Virgin's aggressive attack on Qantas' 65 per cent market share. Standard & Poor's downgraded Qantas' rating to junk status in December after the airline's shock announcement it expected to axe of 1,000 jobs and would likely post a $300 million first half loss. "As such, we expect that Qantas' business risk and financial leverage will remain at elevated levels and inconsistent with an investment grade rating," said Ian Lewis, a Moody's senior vice president. Virgin has been chasing more lucrative business travellers and this week reported greater returns from airfares for the first five months of the financial year. Qantas' returns are falling. "Qantas' domestic business will remain challenged as Virgin's actions, and Qantas' response to maintain market share, continue to pressure yield," Mr Lewis said. Qantas on Thursday responded with chief financial officer Gareth Evans saying the company was talking to the Australian government about resolving what it says is an uneven playing field that has caused the rapid deterioration in its earnings. The airline opposes Virgin's deal in which three foreign airlines will inject $350 million in equity. Qantas will update the market next month on its $2 billion cost cutting program and capital expenditure and structural review. IG market strategist Evan Lucas said the credit downgrade was significant because it further adversely affected Qantas' ability to meet Virgin's attack on its market share. "They are in a complete freeze, worrying about paying interest rather than spending capex on where it should be going: a new fleet, upgrading facilities et cetera ... ," he told AAP.