BA seeks £600m in emergency funding
Published 17/07/2009 | 11:50
British Airways said today that it planned to raise £600m in emergency cash funding as it battles for survival.
The airline, which also said it expected to report operating losses of around £100m for the quarter to June 30, will raise £300m through a debt issue.
BA said it had agreed new terms with its pension fund, which would release around £330m in banking facilities.
Chief executive Willie Walsh said: “Following discussions with institutional investors, we're taking action to improve our liquidity and strengthen our position within the industry.”
Mr Walsh said it “puts to bed any suggestions that British Airways is in any sort of risk”.
“We are clearly in a very strong position relative to most airlines,” he added.
“However, trading conditions are difficult and that is a situation that the industry must address. I think British Airways is taking all the right actions.”
BA said the deal it had struck with the trustees of its UK defined benefit pension schemes would see it take back the bank facilities which had been set aside for use if the company became insolvent.
The pension funds have not been given anything in return for the loss of access to the back-up funds. Mr Walsh said the funds would benefit from a stronger airline.
The company can draw cash from the facilities at any time before June 21, 2012.
BA said the funding announced today was expected to add £600m of further liquidity to the airline, giving a total of around £2bn.
The airline has already obtained facilities of more than $3bn (£1.9bn) for future aircraft deliveries.
Its debt issue will involve creating bonds that can later be converted into shares.
BA also said that its first quarter results were expected to show revenues of around £1.98bn.
It said its operating loss for the period was “slightly better than market expectation”.
The airline lost a record £401m in the year to March and Mr Walsh has previously said the firm is in a “fight for survival”.
The company paid out nearly £3bn in fuel costs last year due to rising oil prices, while recession has hit demand for flights.
Mr Walsh wants to cut 3,700 jobs, freeze pay for up to two years and has asked the airline’s staff to volunteer to work unpaid for up to a month.