British Airways owner International Airlines Group is looking to raise €2.75 billion in capital as it announced a first-half loss of more than €4 billion as a result of the Covid-19 pandemic.
The group said the fundraising, supported by Qatar Airways, its largest shareholder, will help to boost its balance sheet by reducing financial leverage and increasing its overall liquidity position, which as of June 30 stood at €8.1 billion—only €500 million less than its liquidity at the end of 2019. The group has also completed the sale and leaseback of five aircraft, raising about €380 million, and recently agreed to extend its partnership with American Express in a deal worth £750 million, part of which is the pre-purchase of Avios points that American Express will utilize in the U.K. and globally for its BA-branded cards and membership rewards program.
Passenger traffic across the group fell 98.4 percent year over year in Q2, with capacity down 95.3 percent as the coronavirus pandemic gripped the world and brought air traffic to a virtual halt. IAG chief executive Willie Walsh said the company does not expect passenger demand to recover to 2019 levels until at least 2023, causing each of its airlines to "adjust their business and reduce their cost base to reflect forecast demand in their markets not just to get through this crisis but to ensure they remain competitive in a structurally changed industry."
BA, which placed a large number of its staff on furlough under the U.K. government's Coronavirus Job Retention Scheme, is planning to make up to 12,000 redundancies as it restructures. The British Airline Pilots Association on Monday said its members have voted to accept a temporary 20 percent pay cut and 270 pilot job losses at BA in order to avoid 1,255 redundancies and the mass firing and rehiring of the airline's pilots. The pay cut will reduce to 8 percent over the next two years and remuneration will eventually return to normal, according to the union.
The European arm of IAG's low-cost carrier Level short-haul ceased trading and entered insolvency in June.
Despite the crisis, IAG's board said it remains committed to completing the proposed acquisition of Air Europa, though it is in discussions with current owner Globalia Corporacion Empresarial SA to restructure the €1 billion deal to reflect the impact of the Covid-19 pandemic. However, the group does not plan to use the money raised through the capital increase to purchase the airline.
Walsh commented: "Our industry is facing an unprecedented crisis and the outlook remains uncertain. However, we strongly believe that now is the time to look to the future and strengthen IAG's financial and strategic position. While we have had to make tough decisions on both people and costs, these actions are the right ones to protect as many jobs and serve as many customers as feasible and put IAG in the strongest position possible. The industry will recover from this crisis, though we do not expect this to be before 2023, and there will be opportunities for IAG to capitalize on its strength and leadership positions."
Walsh will be stepping down in September after delaying his retirement to see IAG through what it believed at the time would be the worst of the impact of the pandemic. Iberia CEO Luis Gallego will succeed him as group chief executive.
Originally published in BTN Europe.