As the parent company of such airlines as Aer Lingus, British Airways, Iberia, and others, International Airlines Group (IAG) announced its plans to raise additional capital by issuing preemptive subscription rights, Qatar Airways proposed to seat two non-executive directors on the company’s board. In exchange, the Qatari airline will vote in favor of the proposal.
The matter of accepting the two newcomers to IAG’s board will be decided at its shareholders’ meeting on September 8, 2020.
IAG is looking to raise as much as €2.7 billion ($3.2 billion), to strengthen its balance sheet and to improve its liquidity positions. The group finished H1 2020 with a net loss of €3.8 billion ($4.5 billion), indicated its latest financial result announcement issued on July 31, 2020.
“Our investment in IAG has always been for the long term and we continue to support the Company through these difficult times for our industry,” stated Akbar Al Baker, the chief executive of Qatar Airways, reiterating his support for the company.
Qatar Airways holds a 25.1% stake in IAG. It first acquired shares in the airline group in 2015, when it spent $1.7 billion to acquire a 10% shareholding package. In February 2020, the Gulf-based airline increased its stake from 21.4% to 25.1% for an undisclosed sum.
Reducing costs and expected spending
Throughout the first six months of 2020, IAG was on a quest to reduce its expenses and raise additional liquidity in order to weather the storm. The group‘s latest financial statements indicated that it managed to reduce its weekly cash operating expenses from €440 million ($521 million) in Q1 2020, while the following quarter its weekly expenses stood at €205 million ($243 million).
IAG also managed to reduce its planned aircraft deliveries by 68-75 by deferring or canceling contracts with aircraft manufacturers. As a result, its planned capital expenditure over the two forthcoming years will be cut in half, going from around €14 billion ($16.5 billion) to €7.3 billion ($8.6 billion). The company plans to take in 38 aircraft in 2020 and 15 and 22 jets in 2021 and 2022, respectively.
British Airways and Iberia, two airlines that established IAG, retired their quad-engine aircraft over the course of 2020. Unexpectedly, British Airways announced on July 16, 2020, that with immediate effect, all of its Boeing 747s are to be retired. The London-based airline had the largest passenger fleet of the Super Jumbo with 34 aircraft flying the British Airways’ livery.
Iberia, meanwhile, retired 15 Airbus A340-600 units.
At the end of the first half of the year, IAG had €8.1 billion ($9.6 billion) of liquidity, compared to €8.6 billion ($10.1 billion) at the end of 2019. The airline group expects to raise an additional €1.1 billion ($1.3 billion) with five aircraft sale-and-leaseback, and the extension of its partnership with American Express.
Active discussions with Air Europa
Despite the unfavorable circumstances, the company’s board is still keen to purchase Air Europa from its parent company, Globalia Corporación Empresarial. Reportedly, IAG is looking to half its price for the acquisition of the Spain-based airline and acquire it for a price between €500 and €600 million ($587-704 million). Initially, the agreed price was around €1 billion ($1.1 billion).
The two sides are still in “active discussions regarding a potential restructuring of the acquisition to take into account the impact of the COVID-19 pandemic,” read IAG’s report.