British Airways to get a £2 billion loan, backed by UK Export Finance. It had a £300 million loan earlier
British Airways has been asking for financial help, to get it through the Covid pandemic. Now it has had a new £2 billion funding boost, through a state-backed loan. Its parent company, IAG, has secured commitments for a 5-year loan, underwritten by a syndicate of banks. It is being partially guaranteed by state-backed credit agency UK Export Finance (UKEF) and details are being finalised. The loan has covenants, including perhaps restrictions on dividend payments by the airline to IAG. The money will keep BA going until, it hopes, effective Covid vaccines during 2021 will enable air travel to resume, in high numbers. IAG said it “continues to have strong liquidity with cash and undrawn facilities of €8 billion as at November 30, excluding the UKEF facility.” But it is also looking at other sources of money. BA had previously received £300 million over a year from a Bank of England loan programme for the UK’s biggest companies. It also claimed support from the taxpayer-funded furlough scheme. IAG made a pre-tax loss of £6.2 billion pre-tax loss for the first 9 months of 2020, on revenues down 66% to £6.5 billion. BA is also cutting a quarter of its workforce – so losing 12,000 staff.
BA Covid recovery bid boosted by £2bn bailout
by Phil Davies (Travel Weekly)
Jan 4th 2021
BA Covid recovery bid boosted by £2bn bailout
British Airways received a £2 billion new year funding boost through a state-backed loan.
Parent company International Airlines Group secured commitments for a five-year loan underwritten by a syndicate of banks.
It is being partially guaranteed by state-backed credit agency UK Export Finance (UKEF). [UKEF is the UK’s export credit agency, and provides an export development guarantee to support the working capital and capital expenditure needs of UK exporters that meet certain criteria.]
“British Airways expects to drawdown the facility in January 2021 subject to agreement of final terms with the lenders and UKEF,” IAG announced on new year’s eve.
“The proceeds from the UKEF facility will be used to enhance liquidity and provide British Airways with the operational and strategic flexibility to take advantage of a partial recovery in demand for air travel in 2021 as Covid-19 vaccines are distributed worldwide.
“IAG continues to have strong liquidity with cash and undrawn facilities of €8 billion as at November 30, excluding the UKEF facility.”
IAG revealed it is exploring other debt initiatives to further improve its liquidity in addition to the UKEF facility and will update the market “in due course”.
UKEF is the UK’s export credit agency and provides an export development guarantee to support the working capital and capital expenditure needs of UK exporters that meet certain criteria.
BA had previously received £300 million over a year from a Bank of England loan programme for the UK’s biggest companies. It also claimed support from the taxpayer-funded furlough scheme.
A spokesman for UKEF said: “British Airways is one of the UK’s most important airlines, and its only hub carrier.
“This support will ensure that British Airways can bounce back after the pandemic and continue providing critical connections between the UK and the rest of the world.”
IAG’s financial results issued in October for the first nine months of 2020 showed a £6.2 billion pre-tax loss on revenues down 66% to £6.5 billion. BA is also cutting 12,000 staff – one in four of its workforce.
The UK had been criticised for its lack of targeted support for the airline industry compared with European rivals such as France, Germany and the Netherlands, which have pumped billions of euros into their national carriers.
The funding agreement came alongside IAG plans to ensure that its EU licensed airlines continue to comply with European ownership and control rules following Brexit.
The plans include the implementation of a national ownership structure for Aer Lingus and changes to the group’s long-standing national ownership structure in Spain where it owns Iberia and low-cost carrier Vueling.
The “remedial plans” were approved by national regulators in Spain and Ireland and the EU has been notified.
The make up of the IAG board of directors has also been changed so that it has a majority of independent EU non-executive directors.
British Airways is entitled to repay the loan at any time on notice. The arrangement contains some non-financial covenants, including restrictions on dividend payments by the airline to IAG.
AG finalises €2.75bn fundraising to withstand ‘prolonged downturn’
by Phil Davies (Travel Weekly)
Sep 10th 2020,
British Airways owner IAG has finalised a €2.75 billion fund raising backed by largest shareholder Qatar Airways.
The proceeds will help the airline group withstand a more “prolonged downturn” in air travel due the Covid-19 pandemic.
It will also provide IAG with the “operational and strategic flexibility” to take advantage of a recovery in demand for air travel.
There has been no change to the group’s expectation that it will take until at least 2023 for passenger demand to recover to 2019 levels.
The parent company of other airlines such as Aer Lingus, Iberia and Vueling “believes the capital increase, together with its quick response to the crisis, should enable the group to emerge from the current pandemic in a strong position, with more resilience, greater flexibility and the ability to make the right operational and strategic decisions for the long term benefit of all its stakeholders”.
BA is in the process cutting up to 13,000 jobs and IAG expects to report restructuring charges of about €330 million in its 2020 results associated redundancies.
The BA headcount was reduced by 8,236 by the end of August due to staff leaving the business and mostly as a result of voluntary redundancy, IAG revealed.
“It has concluded labour agreements with its pilots, engineers and Heathrow customer service staff,” the group added.
“In regard to cabin crew, agreement in principle has been reached with Unite and a consultative ballot is expected to start shortly.
“Other consultation discussions continue, including with Heathrow ground handling services and cargo operations staff, UK contact centre employees and Gatwick-based cabin crew.”
Iberia and Vueling continue to benefit from the Spanish government’s furlough scheme, which is expected to be extended into 2021.
Aer Lingus has implemented reductions in salaries and working hours across and expects 250 voluntary redundancies by the end of 2020.
IAG said it continues to expect that it would reach breakeven in terms of net cash flows from operating activities during the final quarter of this year “as a result of mitigating actions taken to reduce operating expenses further and enhance working capital”.
Third quarter 2020 capacity is expected to decline by 78% compared to 2019 and lower than a decline of 74% previously expected.
Capacity for the fourth quarter is expected to decline by 60% compared to 2019 and compared to a decline of 46% previously expected.
Capacity for 2021 is expected to decline by 27% compared to 2019, a reduction compared to 24% previously planned.
British Airways lays off up to 12,000 staff, due to likely air travel decline for years
Madrid-based IAG, the owner of British Airways, says 12,000 of BA’s total staff of 45,000, now face redundancy. The airline is trying to conserve cash to keep going. Passenger numbers are expected to halve compared to 2019. BA had already furloughed more than half (22,626) of its 45,000 workers. In a statement after the close of the Stock Exchange, IAG said: ‘In light of the impact of Covid-19 on current operations and the expectation that the recovery of passenger demand to 2019 levels will take several years, British Airways is formally notifying its trade unions about a proposed restructuring and redundancy programme. The proposals remain subject to consultation but it is likely that they will affect most of British Airways’ employees and may result in the redundancy of up to 12,000 of them.” …”There is no Government bailout standing by for BA and we cannot expect the taxpayer to offset salaries indefinitely.” News that thousands of people will lose their jobs comes weeks after the airline company’s Spanish owners axed a controversial £300million payout to shareholders earlier this month.