British Airways received a £2 billion new year funding boost through a state-backed loan.
Parent company International Airlines Group secured commitments for a five-year loan underwritten by a syndicate of banks.
It is being partially guaranteed by state-backed credit agency UK Export Finance (UKEF).
“British Airways expects to drawdown the facility in January 2021 subject to agreement of final terms with the lenders and UKEF,” IAG announced on new year’s eve.
“The proceeds from the UKEF facility will be used to enhance liquidity and provide British Airways with the operational and strategic flexibility to take advantage of a partial recovery in demand for air travel in 2021 as Covid-19 vaccines are distributed worldwide.
“IAG continues to have strong liquidity with cash and undrawn facilities of €8 billion as at November 30, excluding the UKEF facility.”
IAG revealed it is exploring other debt initiatives to further improve its liquidity in addition to the UKEF facility and will update the market “in due course”.
UKEF is the UK’s export credit agency and provides an export development guarantee to support the working capital and capital expenditure needs of UK exporters that meet certain criteria.
BA had previously received £300 million over a year from a Bank of England loan programme for the UK’s biggest companies. It also claimed support from the taxpayer-funded furlough scheme.
A spokesman for UKEF said: “British Airways is one of the UK’s most important airlines, and its only hub carrier.
“This support will ensure that British Airways can bounce back after the pandemic and continue providing critical connections between the UK and the rest of the world.”
IAG’s financial results issued in October for the first nine months of 2020 showed a £6.2 billion pre-tax loss on revenues down 66% to £6.5 billion. BA is also cutting 12,000 staff – one in four of its workforce.
The UK had been criticised for its lack of targeted support for the airline industry compared with European rivals such as France, Germany and the Netherlands, which have pumped billions of euros into their national carriers.
The funding agreement came alongside IAG plans to ensure that its EU licensed airlines continue to comply with European ownership and control rules following Brexit.
The plans include the implementation of a national ownership structure for Aer Lingus and changes to the group’s long-standing national ownership structure in Spain where it owns Iberia and low-cost carrier Vueling.
The “remedial plans” were approved by national regulators in Spain and Ireland and the EU has been notified.
The make up of the IAG board of directors has also been changed so that it has a majority of independent EU non-executive directors.
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