IAG, which also owns Aer Lingus and Vueling, revealed a record operating loss of nearly € 1.4 billion ($ 1.7 billion) in the first half of 2020. It also took a hit of € 2.2 billion ($ 2.6 billion) ) in relation to the early retirement of BA Boeing 747 and Iberia’s Airbus A340. The group has canceled or deferred nearly half of its scheduled aircraft deliveries through 2022.
Passenger traffic in the second quarter fell more than 98% compared to the same period last year. Revenue in the quarter fell nearly 90%.
“Our industry is facing an unprecedented crisis and prospects remain uncertain,” CEO Willie Walsh said in a statement. “However, we firmly believe that now is the time to look to the future and strengthen IAG’s financial and strategic position,” he added.
Qatar Airways is the group’s largest shareholder with a 25.1% stake. IAG said Qatar would support the capital increase, which implies that it will provide almost € 688 million ($ 817 million) in new funds.
“Qatar Airways … has confirmed its support for the proposed capital increase and has irrevocably committed to subscribing to its pro rata right,” IAG said in a statement.
Qatar seeks two seats on the board. Shareholders will vote on appointments and the capital increase in September.
Goldman Sachs, Morgan Stanley and Deutsche Bank are underwriting the remainder of the rights issue, which could double the number of IAG shares in issue, according to Bernstein senior research analyst Daniel Roeska. “Investors face the option of doubling their investment or being substantially diluted,” he said in a note.
IAG shares fell more than 7% in London on Friday. The group’s net debt increased 38% last year to almost € 10.5 billion ($ 12.5 billion).
Airlines are now eagerly seeking to reset their flight schedules, but demand remains weak and continued government restrictions have further complicated matters.
IAG’s Walsh said the group was “not close” to where it expected to be in July, operating at just 20% of capacity compared to the same month last year. “We had expected to reach 50%,” he told BBC Radio on Friday.
Walsh said the UK decision to reintroduce quarantine for passengers arriving from Spain, following further outbreaks of coronavirus in some parts of the country, was “disappointing” but has not discouraged travel to other parts of Europe.
“When the restrictions are removed, there is very clear evidence of the accumulated demand and passengers begin to fly again,” he added.
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