Proceeds from the bond funding are earmarked for ‘general corporate purposes’ including the strengthening of IAG’s balance sheet and financial support for “a more prolonged downturn in air travel.
Additionally, the group of flag-carrier airlines said the injection can provide operational and strategic flexibility to take advantage of a recovery in demand, as it arises.
The bonds are being sold in two tranches of €500mln, with the first (Series A) due to mature in March 2025 and the second (Series B) in March 2029.
The issue, which is not being made available to retail investors, will see its coupon determined in a bookbuild process.
Final bond pricing and terms will also be determined in the bookbuild.
IAG – the parent holdings company for British Airways, Iberia, Aer Lingus, and Vueling, - was earlier this month tipped by Credit Suisse to become more competitive as a result of restructuring.
According to the Swiss bank, the BA-owner led the industry in its pandemic cost cutting whilst other airlines struggled to amend theirs.
BA cutting employee costs by 30% surpasses legacy peers in terms of speed and ambition and lowers the bar to return to profitability, the bank said.
A blend of premium leisure growth and cost-cutting can get close to restoring BA’s long-haul margins, with premium leisure’s growth track record suggesting one year’s growth is enough to absorb a 10% loss of corporate traffic, Credit Suisse noted.
The bank expects operating cash flow margins to recover to at least 15%-18% levels over 2019.