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British Airways owner IAG raises €2.74bn and cuts flights to weather pandemic crisis

The rights issue price is more than a 50% discount to last night's closing price

International Consolidated Airlines Group -
Bookings have slowed due to the new quarantine restrictions.

British Airways owner International Consolidated Airlines (LON:IAG) has confirmed a €2.74bn fundraise through a deeply discounted rights issue to weather the current coronavirus (COVID-19) pandemic crisis faced by the air travel industry.

Shareholders had already approved the fundraise earlier this week with the price set today at €0.92 a share or more than a 50% discount to the closing price of €200.40 last night.

Qatar Airways, IAG’s largest shareholder, is taking up its entitlement in full for its 25.1% stake.

British Airways has already slashed 13,000 jobs to mitigate the impact of coronavirus, which saw most of its fleet grounded for months but new quarantine measures recently imposed on travellers have dashed hopes of a quick recovery.

In a statement today, IAG said bookings have slowed following a bounce back in the quarter to end-June 2020 due to new governmental restrictions. Short-haul bookings have fallen slightly following the re-implementation of quarantine requirements by the UK and other European governments, it added.

Long-haul demand has been slower to recover, said the airline. As a result, the capacity for coming months has been cut.

For this quarter, capacity is expected to decline by 78% compared to a previous estimate of 74% while fourth-quarter capacity is expected to be 60% against 46% previously.

There has been no change to the group's expectation that it will take until at least 2023 for passenger demand to recover to 2019 levels and the airline noted that it expects to be cashflow neutral in the fourth quarter.

IAG said it expects to report restructuring charges of c.€330 million in its 2020 results associated with employee redundancies.

As of August 31, 2020, IAH had liquidity of €7.6bn.

Quick facts: International Consolidated Airlines Group

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Price: 171.5 GBX

Market Cap: £8.51 billion

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