British Airways owner IAG confirmed plans to raise $2.75 billion supported by largest shareholder Qatar Airways.

The group previously said it was considering a fund raising on the back of the Covid-19 pandemic, which has triggered thousands of job losses and cost cuts at the UK carrier triggering the threat of strike action.

Confirmation of the Qatar Airways involvement came as IAG reported a half year after tax loss of €3.8 billion against a profit of €806 million in the same period a year earlier as passenger carryings dried up.

IAG expects it will take until at least 2023 for passenger demand to recover to 2019 levels and is restructuring its cost-base to reduce each airline’s size, with consultations being undertaken locally as required.

Deliveries of 68 new aircraft due in 2020 to 2022 have been deferred and certain older aircraft retired early, including 32 Boeing 747s and 15 Airbus A340s.

Chief executive Willie Walsh said: “Our industry is facing an unprecedented crisis and the outlook remains uncertain.

“However, we strongly believe that now is the time to look to the future and strengthen IAG’s financial and strategic position.

“While we have had to make tough decisions on both people and costs, these actions are the right ones to protect as many jobs and serve as many customers as feasible and put IAG in the strongest position possible.”

He added: “The industry will recover from this crisis, though we do not expect this to be before 2023, and there will be opportunities for IAG to capitalise on its strength and leadership positions.”

Referring to the results for the six months to June 30, Walsh said: “All IAG airlines made substantial losses. As a result of government travel restrictions, Q2 passenger traffic fell by 98.4% on a capacity reduction in the quarter of 95.3%.

“We have seen evidence that demand recovers when government restrictions are lifted. Our airlines have put in place measures to provide additional reassurance to their customers and employees on board and at the airport.

“We continue to expect that it will take until at least 2023 for passenger demand to recover to 2019 levels.

“Each airline has taken actions to adjust their business and reduce their cost base to reflect forecast demand in their markets not just to get through this crisis but to ensure they remain competitive in a structurally changed industry.

“IAG continues to take action to strengthen its balance sheet and liquidity position including more than halving its operating cash costs and significantly reducing its capital spending.

“At the end of June liquidity stood at €8.1 billion. Based on our current capacity planning scenario, we would reach break-even in terms of net cash flows from operating activities during quarter 4 2020.”

Chief executive-elect Luis Gallego, executive chairman of Iberia, added: “We are delighted that our largest shareholder, Qatar Airways, has committed its support for the proposed capital increase and we look forward to our continued long-term collaboration.

“We are seeing early signs of passenger demand returning and while early days in this recovery, now is the time for us to be bold again and ensure IAG emerges from this current crisis in a strong position.”

Qatar Airways group chief executive Akbar Al Baker said: “Our investment in IAG has always been for the long term and we continue to support the company through these difficult times for our industry.

“We are confident that IAG will emerge from this global crisis as Europe’s leading airline group and we look forward to working closely together to deliver our joint vision to enhance travel opportunities for airline passengers across the globe.”

IAG also revealed it was engaged in “active discussions” over a potential restructuring of the acquisition of Spanish carrier Air Europa “to take into account the impact of the Covid-19 pandemic” with a further announcement to be made “as appropriate”.

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