International Consolidated Airlines Group (IAG) is weighing up a €2.75bn (£2.5bn) rights issue to shore up its balance sheet. The British Airways owner has been hit hard by the Covid-19 pandemic, posting a €535m adjusted operating loss in the first three months of 2020.
The group had €10bn of undrawn borrowing facilities at the end of April, although its half year results on 31 July will give a clearer indication of its finances. While a firm decision on an equity raise has yet to be made, the new UK quarantine rules on passengers arriving from Spain could add further impetus.
Taking the industry by surprise, the policy shift sent shares across the travel sector tumbling. TUI’s (TUI) shares fell by 11 per cent on Monday, while easyJet (EZJ), Dart (DTG) and IAG all finished the day down 8 per cent.
The fear is that other European destinations could be removed from the ‘safe list’ and holidaymakers who were planning a post-lockdown getaway could shelve their plans. The uncertainty could also impact advance bookings for 2021. The International Air Transport Association (IATA) called the new measures “a big setback for consumer confidence”, suggesting a blanket quarantine is a disproportionate response.
The new rules also add to Ryanair’s (RYA) woes, with the airline revealing it had slumped to a €185m net loss in the three months to 30 June. The group expects to remain loss-making across the summer and says its biggest fear is a ‘second wave’ of infections across Europe.
As travel operators cut costs and jobs to weather the crisis, hopes of salvaging what is left of 2020 look to have been dashed. With new cases rising across Europe, there could be further lockdowns (and losses) to come.
