Aer Lingus 'in dialogue' with State over further loans to boost liquidity 

Earlier this year, the airline borrowed €150m from the Ireland Strategic Investment Fund and said it would be 'appropriate' to borrow more
Aer Lingus 'in dialogue' with State over further loans to boost liquidity 

In the year to date, Aer Lingus has racked up losses of more than €270m, but is finally eyeing some level of recovery.

Aer Lingus is in talks with the Government over potentially tapping more State loans to boost its liquidity.

The airline’s chief executive Lynne Embleton said Aer Lingus is “in dialogue” with the State-backed Ireland Strategic Investment Fund (ISIF) and is reviewing its liquidity levels with owner IAG.

Earlier this year, Aer Lingus borrowed €150m from ISIF and said it would be “appropriate” to borrow more.

Speaking on the back of a third-quarter update, Ms Embleton said more money from ISIF is available if needed. She didn’t clarify if tapping ISIF would be a preferred option for Aer Lingus rather than boosting its liquidity directly from owner IAG’s coffers.

Aer Lingus narrowed its losses in the third quarter, but still lost €80m in the period. In the year to date, the airline has racked up losses of more than €270m. Other airlines, including Ryanair, Wizz Air, and Lufthansa, saw a return to profit in the third quarter.

However, Aer Lingus is finally eyeing some level of recovery. Ms Embleton said the carrier is targeting a return to 90% of pre-Covid flying capacity levels by next summer. 

It hopes to be flying 60% of pre-Covid flight numbers by Christmas and 80% by next Easter.

'Pockets' of strong bookings

Ms Embleton said Aer Lingus has begun to see "pockets" of strong bookings of late, buoyed by the US announcing plans to reopen its borders to fully vaccinated European visitors next week.

Shares in IAG actually rose healthily despite the airline group posting a €452m operating loss for the third quarter and losses of nearly €2.5bn for the first nine months of the year. 

However, the third-quarter result was better than the €567m which analysts had expected and the nine-month showing was down from a corresponding loss of nearly €6bn.

The group, which also owns British Airways and Spanish airlines Iberia and Vueling, said it expects to post a loss of €3bn for this year as a whole.

IAG chief executive Luis Gallego said he is "very optimistic" about the full reopening of transatlantic routes, adding that if it is able to operate 90% of capacity by next summer IAG will return to profitability.

“In the short term, we are focused on getting ready to operate as much capacity as we can and ensuring IAG is set up to return to profitability in 2022,” said Mr Gallego.

IAG is more reliant on usually lucrative North America flights than most European carriers.

Davy said IAG will need "substantial" cash generation to reduce its debt, which has ballooned from €7.5bn to €12.3bn since the end of 2019.

"For IAG it’s all about the full opening of the transatlantic travel corridor from Monday," said Davy analyst Stephen Furlong. 

"IAG expects to have its full pre-Covid level operating there by next summer. This will be needed as although it now has record pro-forma liquidity of €12.1bn, the balance sheet is highly leveraged,” said Mr Furlong.

“However, it has plentiful liquidity to bridge it back to cash-generation — it was targeting €2.1bn free cash flow per annum pre-Covid and so it has grounds to think it can delever organically,” he said.

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