British Airways owner International Airlines Group has launched a €2.75bn emergency fundraising, supported by its biggest shareholder Qatar Airways, to see it through the Covid-19 pandemic that has thrust the industry into a historic crisis.
The group confirmed the rights issue, which it said it was considering last week, as it unveiled a second-quarter loss for the three months to the end of June of more than €2bn after its passenger business collapsed.
Willie Walsh, chief executive at IAG, said the airline group had lost more in this quarter than it had ever lost in a year and was “facing an unprecedented crisis”.
“Anybody who thinks these are short-term issues and challenges that can be resolved by short-term measures, I think fails to understand the scale of the challenge,” he said.
The news drove IAG shares down 7 per cent to 168p — their lowest since 2012 — by Friday afternoon. The stock has lost about 60 per cent of its value in the past 12 months.
IAG, which also owns Iberia, Aer Lingus and Vueling, has already announced plans to cut up to 12,000 jobs at BA as well as retire its entire fleet of 31 Boeing 747 jumbo jets because of the travel downturn.
The slower recovery faced by network carriers such as IAG was highlighted by the group downgrading its passenger capacity outlook for the peak summer months — July, August and September — to just 26 per cent of last year’s levels, compared with its previous plan to fly about 45 per cent.
Mr Walsh said the move was down to uncertainty on travel restrictions in light of a new surge of coronavirus infections across Europe and elsewhere. He pointed to the recent decision by the UK government to reimpose 14-day quarantine restrictions on travellers arriving from Spain after the country reported a rise in infections in some regions.
He said airlines such as BA, which has about 80 per cent of its capacity in long-haul international flying, would face a greater challenge compared with budget rivals such as Ryanair and easyJet, as long-haul and business travel take longer to recover than short-haul leisure flying.
The group said passenger traffic fell 98 per cent in the second quarter because it was “only able to operate a skeleton passenger schedule”. It does not expect the aviation industry to recovery from the pandemic until at least 2023.
The second-quarter operating loss included about €812m of exceptional costs related to impairment of IAG’s aircraft fleet. It had posted a profit of €960m in the same quarter last year.
Airlines across the world have been hit hard by the crisis and IAG is just the latest to seek emergency funding to shore up its finances through the savage aviation downturn.
EasyJet last month sought to raise £450m with an equity placing representing almost 15 per cent of its share capital. Virgin Atlantic has also agreed a £1.2bn rescue package and most carriers are slashing jobs.
As part of IAG’s capital raising, Qatar Airways has decided to take up its right to propose two directors to join the IAG board. The capital increase is dependent on shareholder approval at its general meeting on September 8.
In a separate announcement, IAG announced that Spanish executive Javier Ferrán will become its new chairman in January, replacing the long-serving Antonio Vázquez.