International Airlines Group (IAG) has confirmed subsidiary British Airways has managed to secure a state-backed £2 billion loan which it expects to draw down this month.
The five-year loan – which can be repaid at any time on notice – has been underwritten by a syndicate of banks and ‘partially guaranteed’ by UK Export Finance (UKEF).
British Airways: Enhancing Operational Flexibility
IAG was reported by Business Traveller as saying that the loan “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”.
The facility comes with some conditions, including restrictions on BA being able to pay dividends to its parent company IAG during the term of the loan.
IAG said that the group “continues to have strong liquidity”, with cash and undrawn facilities of €8 billion as at November 30, 2020, excluding the UKEF facility, and added that it is “exploring other debt initiatives to improve further its liquidity and will update the market in due course”.
In May 2020 IAG member carriers Iberia and Vueling secured access to state-backed loans totalling £1.1 billion.
And in July last year BA’s rival UK carrier Virgin Atlantic unveiled a £1.2 billion refinancing package which it said represented a “private-only solvent recapitalisation of the airline”.
British Airways (BA) decided to shrink the upcoming season schedule by canceling more than 15 long-haul routes in 2021. The airline continues to suffer a significant drop in the demand for international air travel.
The British air carrier plans to permanently cancel services on more than 15 long-haul routes from the beginning of the summer season of 2021. BA outlined that such destinations in the United States as Pittsburgh, and Charleston as well as Calgary, Canada, Seoul, South Korea, Durban, South Africa, Dammam, Saudi Arabia, Lima, Peru, Osaka, Japan, Kuala Lumpur, Malaysia, Abu Dhabi, the UAE, and Muscat, Oman would be no longer served after March 28, 2021.
BA also scheduled April 24, 2021, as the last day of operations to Seychelles, a popular winter holiday destination, while temporarily cutting all operations to Sydney, Bangkok, and San Jose from March 28 until at least October 30, 2021.
“We are sorry that, like other airlines, due to the current coronavirus pandemic and global travel restrictions we are operating a reduced and dynamic schedule. We will be in touch with any customers whose flights are affected and advise customers to check the airline website for the latest flight information,” a BA spokesperson told local media on December 17, 2020.
The airline’s decision to cut a bunch of long-haul destinations follows the significant drop in passenger demand and global travel restrictions, after which many air carriers worldwide were forced to cut staff and cancel routes. To stop burning cash and save financial stability, BA has already laid off up to 10,000 employees through the summer season of 2020.