British Airways Owner IAG Agrees $1.8 Billion Of Credit

British Airways’ parent group IAG has agreed to a $1.755 billion line of credit to help it survive this crisis. The line is secured by the group’s aircraft and landing rights at London Heathrow and Gatwick Airports. The fresh boost increases IAG’s total financial liquidity to €10.3 billion ($12.2 billion), placing it in a relatively strong position.

British Airways
The new line of credit will replace an existing one that is set to expire at the end of March, one year after the pandemic decimated business. Photo: Getty Images

Fresh boost

In a statement today, IAG announced that it has secured a revolving credit facility from a group of banks. The credit line is worth $1.755 billion and will last for three years, by which time the group hopes to make a significant recovery. Additionally, two one-year extensions are also available to the group, subject to the discretion of the banks.

To secure this latest revolving credit facility, IAG will offer its owned aircraft (across the subsidiary airlines) and its valuable slots at London Heathrow and Gatwick. However, this credit line has largely been issued to replace two lines that are ending early or expiring. In net terms, IAG has grown its liquidity by only €400 million ($474 million).

British Airways A350
IAG is making moves to boost as it enters the second year battered by the pandemic. Photo: Stuart Bailey for British Airways

The announcement comes just a week after the group issued fresh bonds worth $1.2 billion. These decisions have largely been written off as precautions being taken by IAG to shield itself from any further surprises in the pandemic and possibly help it prepare for a recovery later this year.

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New year

This month marks one year since COVID-19 crippled air travel around the world and forced airlines to ground flights. IAG owns British Airways, Aer Lingus, Iberia, Vueling, Level, and cargo subsidiaries. The group posted a massive $8.5 billion loss for 2020, as all of its airlines (barring cargo) saw traffic plummet to negligible levels.

However, 2021 could mark a restart for the group as vaccines roll out across the globe. The UK, in particular, has raced ahead with vaccinations, allowing British Airways to tentatively make robust summer plans. Bookings for summer holidays have shot up since lockdown easing plans have been announced.

Iberia Airbus A350
Europe has been hit by a slew of national lockdowns, reducing traffic across the continent. Photo: Iberia

Moreover, several countries have reopened their borders to vaccinated travelers from around the world. The gradual reopening of borders could boost IAG’s fortunes in 2021, especially if a health passport is rolled out by the EU for leisure travel over the summer.

Liquidity key

Until countries reopen borders, it’s likely that IAG will continue to rely heavily on its liquidity to cope with the high cash burn across the group. In total, the group has €10.3 billion ($12.2bn) in available funds, divided into €7.8bn in cash or equivalents, €1.7bn in credit facilities, and €800mn in aircraft financing.

Iberia, VeriFLY, Health Passport
IAG has taken drastic cost-cutting measures across airlines, including axing tens of thousands of jobs and retiring aging aircraft types. Photo: Vincenzo Pace | Simple Flying

What do you think about IAG’s future? Will the group need more liquidity? Let us know in the comments!

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