BA to raise 600m pounds to offset losses
LONDON: Hard-pressed British Airways said Friday it plans to raise 600 million pounds ($980 million) to see it through the recession and financial losses, which it estimated at 100 million pounds for the three months through June.
The airline, which has been seeking cost-cutting deals with staff, announced it intended to raise 300 million pounds through a convertible debt issue and that it had secured the return of 330 million pounds worth of guarantees from pension fund trustees.
The debt issue is subject to approval by shareholders.
British Airways shares were up 2 percent at 134.8 pence on the London Stock Exchange.
"The additional liquidity is clearly positive. Nevertheless, we believe that a significant rerating of the stock is unlikely, given the exceptionally weak market conditions, reflected in poor premium traffic volumes," said Gert Zonneveld, analyst at Panmure Gordon & Co.
"We expect substantial losses in the coming two years, the pension deficit remains a major headache and the Iberia (merger) talks seem to be dragging on and on with no immediate prospect of a deal," Zonneveld said.
The securities will be senior unsecured convertible bonds due in 2014, which can be converted into 15 percent to 20 percent of airline shares. The bonds will be available to institutional shareholders on a prorata basis, the airline said.
BA secured an agreement with trustees of its defined benefit pension plans in the U.K. to release up to $540 million in guarantees provided in 2006 as security against the company's possible insolvency.
The facilities will be available to the airline through mid-2012, BA said.
British Airways has called for 3,700 jobs to be cut from its 40,000 staff and a two-year pay freeze. It has also sought volunteers to temporarily forego their paychecks, as Chief Executive Willie Walsh is doing in July.
On Monday, BA pilots voted to accept a 2.6 percent pay cut as part of a package of measures to save the airline 26 million pounds.
The airline has also announced plans to ground aircraft, slash seat numbers and postpone delivery of a dozen new Airbus A380 superjumbos.
BA, which said traffic in June was down 5 percent from a year earlier, is cutting its summer capacity by 3.5 percent, rather than the originally forecast 2.5 percent. Capacity for October through March is expected to be down by 5 percent.