British Airways Reveals Liquidity Increase Of $3.5 Billion

International Airlines Group (IAG) confirmed Monday it had reached two financing agreements for its largest carrier, British Airways. The new deals will boost BA’s liquidity by £2.45 billion (approximately $3.5 billion). IAG also stated it continues to explore other debt initiatives to increase funds further.

BA Boeing 777
IAG has announced that BA is boosting its liquidity by over $3 billion. Vincenzo Pace | Simple Flying

Financing from two sources

The sum consists partially of £2.0 billion ($2.8 billion) from a five-year loan facility guaranteed by UK Export Finance (UKEP). This was first announced by IAG on December 31st, 2020, and is underwritten by a group of several banks. Final arrangements have now been reached, and British Airways will have access to the funds before the end of February.

The airline will be free to repay the loan at any time on notice. However, it does come with some conditions, such as restrictions on dividend payments to IAG from the carrier.

The second part of £450 million is acquired via an agreement with the Trustee of New Airways Pension Scheme (NAPS). This sees the airline defer pension deficit contributions due between October 2020 and September 2021. The funds, including interest, will be paid under a recovery plan currently set for March 2023.

British Airways Airbus A320neo
Part of the additional funds is coming from a deferral of pension deficit contributions. Photo: Getty Images

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IAG’s liquidity

As a group, IAG had €8 billion ($9.7 billion) in liquidity in November last year, excluding the UKEP facility. The company also owns Aer Lingus, Iberia, Vueling, LEVEL and is about to acquire Air Europa following a year of hefty price reductions. 

Its Irish flag-carrier, Aer Lingus, recently secured a €150million ($180 million) recovery loan from the Irish government. Iberia and Vueling have been granted €750 million ($911 million) and €260 million ($316 million), respectively, by the Spanish Instituto de Credito Oficial.

Gatwick, London, British Airways, Easyjet
Last week, BA’s CEO joined other UK airline executives in requesting a roadmap for recovery for the industry. Photo: Getty Images

UK airlines are desperate to plan for summer

Heavy travel restrictions and expensive hotel quarantine regulations continue to take a heavy toll on UK commercial aviation. British Airways joined easyJet, TUI, Jet2 and Ryanair last week in calling on Prime Minister Boris Johnson to create a recovery roadmap for the industry.

The airlines’ executives warned that if the government could not provide a clear indication that air travel would reboot in the coming months, the UK would face a year of limited connectivity to the rest of the world. The country’s economy, they said, would be impacted as a result.

“The aviation industry stands with the government in putting public health at the top of its agenda, but the future of the British economy and the jobs of hundreds of thousands of people are at risk without a sensible and structured plan to safely restart international travel over the coming months,” said Sean Doyle, BA’s Chief Executive said in a joint statement with his colleagues as reported by the Manchester Evening News.

Do you think the UK government should do more for the country’s airlines? What will be the consequences if it doesn’t? Leave a comment and let us know.