IAG, the owner of Aer Lingus, said it planned to raise 2.75 billion euros from shareholders to prop up its finances and allow it to survive what could be a longer-than-expected collapse in flying triggered the coronavirus pandemic.
Backed by its biggest shareholder Qatar Airways, the plan will boost the group's liquidity from the 8.1 billion euros it had at the end of June, and see it through a period of anemic demand that could last until as far out as 2023.
"We strongly believe that now is the time to look to the future and strengthen IAG's financial and strategic position," CEO Willie Walsh said in a statement on Friday.
Airlines around the world have been brought to their knees by the abrupt halt to flying, forcing tens of thousands of redundancies, state bailouts and the collapse of some companies.
A tentative return to flying in Europe, needed to salvage airline's peak summer season when they make most of their profits, has been threatened by signs of rising COVID-19 cases in some popular holiday destinations such as Spain and France.
British Airways, for which IAG counts on for over half of its annual profits, is only flying around 15% of its normal schedule and demand for its two biggest markets U.S. and India is weak due to ongoing UK quarantine rules.
IAG, which also owns Iberia, reported an operating loss of 1.365 billion euros for the second quarter.
British Airways has warned it needs to cut 12,000 jobs and its plans to change contracts for its remaining 30,000 staff has provoked a furious reaction from cabin crew union Unite, who have threatened strike action.
IAG said that the capital boost would also enable it to withstand a more prolonged downturn in its worst case scenario planning. Reuters had previously reported the plan for a rights issue.
"Our industry is facing an unprecedented crisis and the outlook remains uncertain," Walsh said. "These actions are the right ones to protect as many jobs and serve as many customers as feasible and put IAG in the strongest position possible." (Reuters)