British Airways to Raise $1 Billion in Cash

British Airways on July 17 announced it will raise more than $1 billion in cash to survive “the biggest crisis the aviation industry has ever known.”

Europe’s third largest airline also forecast a loss of more than $163 million for the fiscal first quarter.

BA is raising around $490 million from convertible bonds and up to $540 million of bank facilities secured against its older aircraft.

“We’re taking action to improve our liquidity and strengthen our position within the industry,” said Willie Walsh, BA chief executive.

“This puts to bed the suggestions British Airways is in any sort of risk in the short term,” Walsh said.

British Airways cargo volume declined 9.8 percent in June from the same period in 2008, but revenue rose 5.3 percent, reflecting improved yields. BA trimmed capacity by 2.5 percent last month, leaving the load factor 2.2 points lower at 73.4 percent.

BA’s freight traffic fell 9.5 percent year-on-year in May and by 14.8 percent in April.

With the extra funding, the airline said it will have access to $3.26 billion in cash. It also has $3 billion of credit facilities set aside for the purchase of new aircraft.

BA said it would likely make a loss of around $163 million on revenues of $3.23 billion in the three months to the end of June.

BA swung to a record pre-tax loss of $630 million in the year to April 30 from a record profit of $1.45 billion in the previous fiscal year.

BA’s fundraising follows recent capital increases by other European carriers including Air France-KLM, which raised $926 million from a convertible bond, and Lufthansa which generated $1.05 billion in the second of two bonds issues this year.

Contact Bruce Barnard at brucebarnard47@hotmail.com.