British Airways owner International Airlines Group (IAG) has confirmed it is considering a shares issue of up to €2.75 billion to strengthen its finances.
IAG issued a statement confirming it is “evaluating the merits of a rights issue” following media reports suggesting the group would aim to raise €2.5 billion before the end of the summer.
The group said: “Going into the crisis IAG had a strong balance sheet and liquidity with cash and undrawn facilities at 30 April of €10 billion.
“IAG has taken appropriate actions to strengthen its balance sheet and boost its liquidity position.
“This includes the announcement earlier today that IAG has extended its global commercial partnership with American Express and will receive a payment of approximately €750 million.”
However, IAG said: “No decision has been made as to whether or when to proceed with a rights issue.”
The group owns BA, Iberia, Aer Lingus and Vueling and is awaiting regulatory sign-off of on its €1 billion acquisition of Air Europa – Spain’s second-largest carrier – late last year.
The group is due to publish half-year results at the end of July.
BA is in the process of cutting up to 12,000 jobs from its workforce of 42,000. The UK carrier reached a deal with pilots’ union Balpa this week on pay cuts of 20%.
That deal is now going to a ballot. BA has given cabin crew, ground staff and engineers until the end of July to accept redundancy or apply for a new job on pay reduced by 20% or more.
News agency Reuters reported IAG is set to issue shares to avoid seeking a government bailout.
It quoted an unnamed source who described it as “a rescue deal” and said: “Investors will undoubtedly prefer to have more visibility on air traffic during the summer months.”
IAG’s share price has lost two-thirds of its value since the start of the year, in common with most airlines.
The group’s Spanish carriers Iberia and Vueling secured €1 billion in government-backed loans in May. BA has accessed £300 million through the UK coronavirus corporate finance facility and used the government’s furlough scheme to lay off 23,000 workers.
However, IAG’s leading network airline rivals in Europe have attracted large state-aid packages.
Lufthansa accepted €9 billion in loans and credit guarantees from the German government. Air France secured €7 billion in aid from the French government and sister carrier KLM was granted €3.4 billion in aid by the Dutch government.
Reuters reported IAG is working with investment banks Goldman Sachs and Morgan Stanley and corporate brokers Barclays and Deutsche Bank on the plan.
IAG chief executive Willie Walsh is due to step down in September, to be replaced by Iberia chief Luis Gallego.
Walsh had been due to leave in March but stayed on to navigate IAG through the first months of the Covid-19 crisis.