Aer Lingus and British Airways owner IAG is set to issue shares at the end of the summer in a bid to raise up to €2.5bn to keep the business afloat and avoid a government bailout, according to sources.
IAG is most likely to raise capital with a rights issue, where new shares are offered to existing shareholders at a discount, by the beginning of September. Other options, such as an equity placing and a concurrent issuance of convertible bonds are also being considered, the sources said.
“Being a rescue deal, investors will undoubtedly prefer to have more visibility on air traffic during the summer months,” one source said. IAG’s share price has lost 66% of its value since the start of the year.
The group, which also owns Iberia and Vueling, renewed a €825m partnership multi-year deal with American Express. Outgoing IAG boss Willie Walsh put together the conglomerate over the past decade, including Aer Lingus five years ago.
With passenger numbers decimated this year and experts forecasting it will be years before they recover, global airlines began sweeping restructuring processes. Air France secured a €7bn aid package from the French government and Lufthansa struck a €9bn government bailout.
IAG, which is also reviewing a planned €1bn acquisition of Spanish carrier Air Europa because of the harsh economic climate, has not asked for a specific government bail-out but has taken advantage of state-backed loan schemes in Britain and Spain.
British Airways has warned it needs to cut 12,000 jobs and Aer Lingus may cut up to 500 jobs. Spanish airlines Iberia and Vueling have secured €1bn of government-backed loans in May. BA has also accessed the UK coronavirus corporate finance facility and used the government’s furlough schemes.
The company is working with US investment banks Goldman Sachs and Morgan Stanley and its corporate brokers Barclays and Deutsche Bank on the plan, the sources said, expecting an announcement could coincide with results on July 31.
IAG reported a first-quarter operating loss before exceptional items of €535m and expects significantly worse losses in the second quarter.
Reuters. Additional reporting Irish Examiner