* IAG launches 3:2 rights issue
* New shares offered at 36% discount
* Biggest shareholder Qatar subscribes for its entitlement
* IAG says outlook for rest of year, 2021 has worsened
* BA reaches agreement in principle with cabin crew union
(Adds detail, share price, IAG spokeswoman)
By Sarah Young
LONDON, Sept 10 (Reuters) - British Airways owner IAG
launched a heavily discounted rights issue on Thursday
to raise 2.74 billion euros ($3.2 billion) to help strengthen
its pandemic-hit finances, in a first test of faith in its new
boss Luis Gallego.
Airline group IAG, which also owns Iberia, said in a
statement that its largest shareholder, Qatar Airways Group,
which has a 25.1% holding, had undertaken to subscribe for its
pro-rata entitlement in the fully underwritten capital increase.
The funds will be used to reduce debt and help IAG withstand
a prolonged downturn in travel, the group said, as it also
warned that the outlook for the rest of the year and 2021 had
worsened since the rights issue was announced in July.
IAG expects its September to December capacity to be 60%
lower than 2019's level, a cut from its previous estimate of a
46% drop, and said in 2021 capacity is expected to fall by 27%,
worse than the 24% previously predicted.
This underlines the scale of the challenge facing Gallego,
the Spanish insider who took over from long-time boss Willie
Walsh this week.
Budget competitor Ryanair slashed its annual
passenger target on Wednesday, as most airlines signal capacity
cuts due to resurgent COVID-19 infections and as travel
restrictions dent recovery hopes.
JOB CUT PROGRESS
Under the terms of the fundraising, which was announced in
July and approved by shareholders on Tuesday, investors are
being offered new shares at a 36% discount and can subscribe to
three new shares for every two they own.
IAG, which also owns Vueling and Aer Lingus, said that
despite the downgrades it still expected to reach breakeven from
operating activities in the last quarter of 2020, and progress
was being made with job cuts at BA.
Shares in IAG were flat at 200 pence at 0800 GMT after the
group said the 2.97 billion new shares would be at a
subscription price of 0.92 euros, a 36% discount to the
theoretical ex-rights price based on the closing price on
Wednesday.
An IAG spokeswoman said a full prospectus, including a
timetable, would be published later on Thursday.
BA, which is aiming to shed 13,000 jobs as a result of the
crisis, has already made over 8,000 redundancies, IAG said,
adding that the airline has also reached agreement in principle
with Unite, which represents cabin crew.
A consultative ballot is expected shortly, which could end a
bitter row with the union.
IAG said that it expected to report restructuring charges of
330 million euros in 2020 due to redundancies.
($1 = 0.8453 euros)
(Reporting by Sarah Young; additional reporting by Paul Sandle,
Editing by Jason Neely, Jan Harvey and Alexander Smith)
International Airlines (IAG)