(Alliance News) - International Consolidated Airlines Group SA on Thursday said it will raise EUR2.74 billion through a share issue to strengthen its balance sheet and reduce leverage.
The Anglo-Spanish airline said it will issue 2.98 billion shares at a price of EUR0.92 each. The subscription price represents a 36% discount to Wednesday's closing price.
In London, IAG shares were trading 1.1% higher on Thursday at 202.60 pence each.
The FTSE 100-listed company said the funds raised will strengthen its balance sheet and reduce leverage. IAG noted that the share issue proceeds will help the company to withstand a more prolonged downturn in air travel.
In addition, IAG said the funds will provide it with the operational and strategic flexibility to take advantage of a recovery in demand for air travel.
Qatar Airways, IAG's largest shareholder with a 25% stake, has irrevocably undertaken to subscribe for its pro-rata entitlement under the capital increase.
As at Monday last week, the company said it had total liquidity of EUR7.6 billion. Cash at the end of August included a GBP750 million payment from American Express, a significant part of which was a pre-purchase of Avios points.
Turning to trading, the British Airways parent said June saw a significant increase in bookings to 30% of prior year levels by the end of the month, following an almost complete cessation of new booking activity in April and May.
Domestic travel has led the recovery, followed by international short-haul and then long-haul travel, IAG said.
Since July, IAG said it has experienced an overall levelling off of bookings. Short-haul bookings have fallen slightly following the re-implementation of quarantine requirements by the UK and other European governments for travellers returning from some countries.
As a result, the company said its capacity planning scenario for 2020 has been lowered to minus 63% in terms of available seat kilometres compared to 2019 from minus 59% previously.
For the third quarter of 2020, capacity is expected to decline by 78% compared to 2019, worse than 74% predicted previously.
For the final quarter of 2020, capacity is expected to decline by 60% compared to 2019. Previously, IAG predicted a 46% decline.
For 2021, IAG expects capacity to decline by 27% compared to 2019, a further reduction compared to 24% previously planned.
Despite a lower capacity in the fourth quarter of 2020 than under the previous planning scenario, the company said it continues to expect that it would reach breakeven in terms of net cash flows from operating activities. This is as a result of mitigating actions taken to reduce operating expenses further and enhance working capital.
IAG has continued to implement its restructuring plans, it said. British Airways is in the process of reducing headcount by up to 13,000. By the end of August, the headcount was reduced by 8,236 due to employees leaving the business and mostly as a result of voluntary redundancy.
Aer Lingus has implemented reductions in salaries and working hours across the airline and expects 250 voluntary redundancies by the end of 2020.
By Evelina Grecenko; evelinagrecenko@alliancenews.com
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International Airlines (IAG)