IAG Accepts £300 Million In UK Government Loans

According to recent reports, European airline group IAG has accessed £300 million ($371 million) in UK government-backed loans to boost liquidity. Money comes explicitly from the country’s Coronavirus Corporate Financing Facility (CCFF), designed for larger firms to “bridge coronavirus disruption to their cash flows through the purchase of short-term debt.”

British Airways Heathrow aircraft line up
Funds come from the UK’s Coronavirus Corporate Financing Facility (CCFF). Photo: Getty Images

Terms of the deal

As stated above, the £300 million comes from the UK’s Coronavirus Corporate Financing Facility (CCFF) and is essentially a state-backed loan. According to the Bank of England, these are characteristics associated with CCFF funding:

  • Maturity of one week to twelve months
  • Where available, applicants must have a suitable credit rating from at least one of Standard & Poor’s, Moody’s, Fitch and DBRS Morningstar as at 1 March 2020.
  • Governed by English law and subject to the jurisdiction of the English courts
  • The facility will offer financing on terms comparable to those prevailing in markets in the period before the COVID-19 economic shock.

For IAG, this becomes the 2nd form of government assistance it has accepted. Last week, the group’s Spanish carriers Iberia and Vueling secured €1 billion ($1.1 billion) in government-backed loans. More specifically, Spanish flag-carrier Iberia will receive €750 million ($825 million), while its low-cost compatriot Vueling €260 million ($286 million).

aer lingus
Irish carrier Aer Lingus is a part of the IAG family of airlines. Photo: Getty Images

Restructuring needed

According to Bloomberg, IAG Chief Executive Officer Willie Walsh said earlier this week that his company needs to restructure and slim down for a challenging future amid an “unprecedented” slump.

Part of this restructuring will see its largest airline, British Airways, slash 12,000 jobs, or 30% of its workforce. The airline is also said to be considering the closure of its secondary hub at London Gatwick airport.

“We do not expect passenger demand to recover to the level of 2019 before 2023 at the earliest…Balance sheets are going to be very different when we come out of this. Structural reform is going to be required on an industry basis and not just on an individual airline basis.” -Willie Walsh, Chief Executive Officer, IAG

Another aspect of restructuring is IAG’s slashing of new aircraft orders. In fact, the group will only take delivery of 75 aircraft over the next three years instead of the planned 143. Furthermore, it will consider the early retirement of its inefficient Boeing 747s and Airbus A340s while potentially cutting even more planes whose leases are nearing the end of their term.

Iberia and Vueling have secured over a billion euros in loans. Photo: Iberia


Walsh had initially said IAG wasn’t applying for bailouts, stating in March that airlines should be expected to “look at self-help” before calling for aid. Clarifying his position, Walsh noted recently:

“What I’ve always been opposed to is where inefficient failing companies receive bailouts from governments…Where airlines have been unwilling or unable to reform, they should not be bailed out by receiving free money.”

Interestingly, despite its fleet and workforce changes, IAG may still go ahead with its intention to buy as many as 200 737 MAX jets. Furthermore, there doesn’t seem to be any changes to its plans to buy Spain’s Air Europa.

What other restructuring do you think we can expect to see from IAG and its family of airlines? Let us know your thoughts in the comments.