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IAG seeks to raise €2.75bn and renegotiate Air Europa deal

The parent of British Airways does not expect its industry to recover before 2023
IAG seeks to raise €2.75bn and renegotiate Air Europa deal

International Consolidated Airlines Group (IAG) has been backed by its largest shareholder, Qatar Airways, as it plans to raise €2.75bn (£2.48bn) pending shareholder approval. The group, which owns British Airways, recorded an exceptional charge of €2.1bn in its interim results, which was linked to losses on fuel hedging derivatives and the impairment of aircraft.

IC TIP: Sell at 168p

IAG has launched the equity raise in a bid to reduce its leverage and prepare its balance sheet for a prolonged downturn in the aviation sector. Its passenger numbers were down 95 per cent in its second quarter, and IAG does not expect air traffic to recover before 2023. Shareholders will vote on the package on 8 September and the equity raising will be conducted as quickly as possible following the meeting.

The group is also seeking to renegotiate the terms of its €1bn acquisition of Air Europa, which it agreed in November last year. IAG is reportedly seeking to reduce its offer for the Spanish airline, and in its results announcement said that it was in talks over revising the deal to reflect the impact of the coronavirus pandemic. The proceeds of its equity raise would not be used to fund the deal.

The consensus forecast for the full-year loss per share stands at 122¢, rising to earnings per share of 19¢ in 2021.

INTERNATIONAL CONSOLIDATED AIRLINES GROUP (IAG)
ORD PRICE:168pMARKET VALUE:£ 3.7bn
TOUCH:167.8-168p12-MONTH HIGH:684pLOW: 159p
DIVIDEND YIELD:NilPE RATIO:1
NET ASSET VALUE:391¢*NET DEBT:€10.5bn
Half-year to 30 JunTurnover (€bn)Pre-tax profit (€bn)Earnings per share (¢)Dividend per share (¢)
201912.031.040.614.5
20205.29-4.2192nil
% change-56-+372-
Ex-div:na   
Payment:na   
£1=€1.11 *Includes intangible assets of €3.3bn, or 167¢ a share