Take-Off For IAG's Planned €2.74bn Coronavirus Capital Hike
Aer Lingus owner International Airlines Group (IAG) has launched a heavily discounted rights issue to raise €2.74 billion to help strengthen its pandemic-hit finances, in a first test of faith in its new boss Luis Gallego.
Airline group IAG, which also owns British Airways, Iberia and Vueling, said in a statement that its largest shareholder, Qatar Airways Group, which has a 25.1% holding, has undertaken to subscribe for its pro-rata entitlement in the fully underwritten capital increase.
The funds will be used to reduce debt and help IAG withstand a prolonged downturn in travel, the group said, as it also warned that the outlook for the rest of the year and 2021 has worsened since the rights issue was announced in July.
IAG expects its September to December capacity to be 60% lower than 2019's level, a cut from its previous estimate of a 46% drop, and said that in 2021 capacity is expected to fall by 27%, worse than the 24% previously predicted.
This underlines the scale of the challenge facing Gallego, the Spanish insider who took over from long-time boss Willie Walsh this week.
Under the terms of the fundraising, investors are being offered new shares at a 36% discount and can subscribe to three new shares for every two they own.
Job Cut Progress
IAG said that, despite the downgrades, it still expected to reach breakeven from operating activities in the last quarter of 2020, and progress is being made with job cuts at British Airways.
British Airways, which is aiming to shed 13,000 jobs as a result of the crisis, has already made over 8,000 redundancies, IAG said, adding that the airline has also reached agreement in principle with Unite, which represents cabin crew.
A consultative ballot is expected shortly, which could end a bitter row with the union.
IAG said that it expects to report restructuring charges of €330 million in 2020 due to redundancies.