IAG Launches €2.7 Billion Rights Issue

IAG has provided an update on its capacity and restructuring plans as it has launched a €2.7 billion rights issue.

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International Airlines Group Tailfins
International Airlines Group Tailfins

IAG has formally launched its €2.7 billion rights issue. In doing so the group has provided an update on its capacity plans for the rest of the year and the restructuring of its airlines.

As is usual for updates to investors from IAG these are very matter of fact and only include plans that have actually been decided, and not any measures that may be under consideration – the rights issue was itself was denied until the official announcement.

IAG has also only given information on bookings and capacity plans at a group level. It’s a given that Iberia and Vueling benefit more from a recovery in short-haul travel than BA, which is more exposed to corporate and long-haul travel.

Booking Trends

After new bookings collapsed almost entirely in April and May, they returned to 30% of prior year levels in June.

As IAG has previously indicated, the strongest recovery was in domestic bookings (primarily Spain), then short-haul, with long-haul some way behind.

New booking activity is said have levelled off in July. Short-haul bookings have fallen slightly following the decision by the UK government to introduce mandatory quarantine measures and other European governments also introducing a mandatory quarantine on passengers returning from Spain.

As expected, long-haul bookings remain significantly depressed due to travel restrictions. However, it is said that they have improved slightly since mid-August.

Many airlines have said that significant pent-up demand is released when travel restrictions are lifted.

Capacity Plans

As measured in Available Seat Kilometres (ASK), capacity in the 3rd quarter of 2020 has been reduced by 78% compared to 2019.

In the 4th quarter of 2020, IAG plans to reduce capacity by 60% compared to 2019. These are larger reductions than IAG set out at the end of July:

IAG 2nd Quarter Results Presentation, 31 July 2020
IAG 2nd Quarter Results Presentation, 31 July 2020

Overall capacity in 2020 is expected to be 63% lower than 2019. In 2021, current plans are that capacity will be reduced by 27%. This is of course subject to change.

In IAG’s “downside” planning scenario for deciding on the size of rights issue, it has assumed a worst case scenario of a 66% reduction in capacity for 2020 and a 35% reduction in 2021.

Given the significant uncertainty on the lifting of travel restrictions and the availability of a vaccine for COVID-19, if travel restrictions remain in place in to 2021, IAG will have to raise further funds.


As at 31 August 2020, IAG had total liquidity of €7.6 billion.

This comprised of €5.8 billion of cash, cash equivalents and interest-bearing deposits and €1.8 billion of undrawn and committed general and aircraft facilities. 

This compares to total liquidity of €10 billion at 30 April 2020 and €8.1 billion at 30 June 2020:

IAG 2nd Quarter Results Presentation, 31 July 2020
IAG 2nd Quarter Results Presentation, 31 July 2020

BA Restructuring

British Airways is expected to reduce its headcount by up to 13,000 employees.

By the end of August, 8,236 employees had left the airline. This was mostly by way of voluntary redundancy.

IAG says has BA has reached agreements with pilots, engineers and Heathrow customer service staff. An agreement in principle has been reached with Unite for Heathrow based cabin crew and a consultative ballot is expected to start shortly.

Other consultation discussions are said to be continuing with Heathrow ground handling and cargo operations staff, UK Contact Centre employees and Gatwick based cabin crew. 

The next major update from IAG should be at its third quarter results presentation on 30 October 2020. It’s not known whether its annual Capital Markets Day is going ahead this year.

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