What capital raising strategy is IAG employing?

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IAG is undertaking a capital raising of up to €2.75 billion from investors.

International Consolidated Airlines Group (IAG), the parent company of British Airways and Iberia, has announced plans to raise capital to navigate the economic impact of the coronavirus pandemic. The airline group intends to seek up to €2.75 billion from investors. This move follows a significant net loss reported for the first half of the year, a period heavily affected by the global health crisis.
Capital Raising Objective

The primary aim of this capital raising initiative is to provide IAG with the necessary financial resources to manage the ongoing demand-destroying effects of the coronavirus crisis. The company experienced a substantial net loss of €3.8 billion in the first six months of the year, a stark contrast to the profit recorded in the same period of the previous year. This financial downturn is directly attributed to the widespread grounding of aircraft and travel restrictions implemented globally to curb the spread of Covid-19.
Financial Performance Impacted by Pandemic

The results for the first half of the year were severely impacted by the Covid-19 outbreak, which caused a devastating blow to the global airline and travel sectors. Sales for IAG more than halved, dropping to €5.3 billion in the first six months of the year. Concurrently, the company swung to a pre-tax loss of €4.2 billion, compared to a profit of €1 billion in the prior year. Chief Executive Willie Walsh stated that all IAG airlines incurred substantial losses, with second-quarter traffic collapsing by 98.4 per cent due to government travel restrictions, leading to a 95.3 per cent reduction in capacity.
Broader Industry Context and Outlook

IAG's situation reflects the broader challenges faced by the airline industry. Carriers worldwide, including Air Canada, American Airlines, and Lufthansa, have implemented significant cost-cutting measures and efficiency drives. Walsh indicated that while demand shows signs of recovery when government restrictions are lifted, passenger demand is not expected to return to 2019 levels until at least 2023. This projection aligns with warnings from the International Air Transport Association, which anticipates a global air traffic recovery to pre-pandemic levels no earlier than 2024. The uncertainty surrounding new travel restrictions, such as those imposed on travel with Spain, further complicates the outlook for the sector.

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What capital raising strategy is IAG employing?

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