IAG boosts liquidity by £2.45bn after loan deal, pension deficit deferral

British Airways owner IAG on Monday said it had boosted total liquidity by £2.45bn, via a loan deal and deferred pension deficit payments to help it weather the Covid-19 pandemic.

The company, which also owns Iberia and Aer Lingus, said a deal had been reached on a £2bn loan partially backed by the UK government and deferral of £450m in pension deficit contributions.

IAG said continued to explore other debt initiatives to further improve its liquidity. The five-year loan is underwritten by a syndicate of banks and partially guaranteed by UK Export Finance (UKEF).

“British Airways has now reached final agreement with UKEF and the lenders and expects to drawdown the facility before the end of February 2021,” IAG said in a statement on Monday.

It added that repayment of £450m in accumulated contributions plus interest would be added to the end of the existing pension recovery plan, currently March 2023. BA has agreed to provide property assets as security, which will remain in place until the airline has repaid the deferred contributions.

The pandemic has battered airlines globally as travel bans imposed to stymie the spread of the virus ground aircraft fleets, choke off income and increase cash burn for carriers.

IAG's Aer Lingus and the Irish government are currently engaged in talks about more state financial support, Deputy Prime Minister Leo Varadkar said last week.

Ireland’s sovereign wealth fund said earlier this month that it had provided a €150m three-year loan to the airline.