British Airways and Iberia parent International Airlines Group is raising up to €400 million to fund its acquisition of Vueling, enhance liquidity and lower its cost of capital.

The cost of purchasing 44% of Vueling shares was €123.5 million which was funded initially by bridge loans from British Airways and Banco Santander.

The net proceeds from the convertible bonds launched by IAG bonds will be used partly for the repayment of the loans.

IAG now owns 90.51% of Barcelona-based low-cost carrier Vueling due to the 45.85% of shares owned by Iberia.

IAG chief executive Willie Walsh said: “We are raising cash to fund our acquisition of Vueling, an airline that will be a great addition to IAG.

“It will also enable IAG to have cash available to improve general liquidity and improve the credit profile of the group.”