BA emergency funding 'puts concerns to bed'
Embattled airline British Airways today said a £600 million emergency cash funding "puts to bed" concerns over its future.
The move included the removal of £330 million in funds from its pension fund, which had been set aside for the pension scheme to use if the company became insolvent.
BA, which also said it expected to report operating losses of about £100 million for the quarter to June 30, said it planned to raise another £300 million through a debt issue.
Chief executive Willie Walsh said the move "puts to bed any suggestions that British Airways is in any sort of risk".
"We are clearly in a very strong position relative to most airlines," he added.
"However, trading conditions are difficult and that is a situation that the industry must address. I think British Airways is taking all the right actions."
The airline lost a record £401 million in the year to March and Mr Walsh has previously told staff that the firm is in a "fight for survival".
The company paid out nearly £3 billion in fuel costs last year due to rising oil prices, while recession has also hit demand for flights.
Mr Walsh wants to cut 3,700 jobs, freeze pay for up to two years and has asked staff to volunteer to work unpaid for up to a month.
Today he said: "This goes hand in hand with our cost reduction and efficiency initiatives which are designed to create the right conditions for our sustainable, long-term profitability."
BA said the deal it had struck with the trustees of its UK defined benefit pension schemes undid the provisions arranged in 2006 which would have provided a buffer had the company gone bust.
Mr Walsh said the trustees would instead benefit from a stronger airline.
In a statement today the trustees said: "This will allow BA to use the financing facility that underpins the current guarantees to improve its liquidity position.
"The trustees are advised and are satisfied that this measure taken together with other corporate activities and initiatives will serve to improve the financial position and prospects of the company with a view to meeting its obligations to the scheme."
The pension funds said £230 million of the existing guarantees would be replaced by other security.
BA can draw money from the facilities at any time before June 21, 2012.
It said today's funding moves were expected to add £600 million of further liquidity to the airline, giving a total of about £2 billion.
The airline has already obtained facilities of more than three billion US dollars (£1.9 billion) for future aircraft deliveries.
Its debt issue will involve creating bonds that can later be converted into shares.
BA also said today that its first quarter results were expected to show revenues of approximately £1.98 billion.
It said its operating loss for the period was "slightly better than market expectation".
BA shares rose up to 5 per cent at one point today.
Airline analyst Gert Zonneveld of Panmure Gordon said the additional liquidity "is clearly positive" although he said the firm would still be hit by the exceptionally poor market conditions.
"We expect substantial losses in the coming two years," he said.
He added that the pension deficit remained a "major headache" and said the airline's shares now traded close to historic lows.
- 2 Exclusive: Abusers using spyware apps to monitor partners reaches 'epidemic proportions'
- 3 Andy Murray takes to Twitter to show off his Christmas jumper
- 4 Margaret Thatcher 'expressed fears of Asian rising' at Anglo-Irish summit in 1984
PlayStation and Xbox hacked by Lizard Squad
Exclusive: Abusers using spyware apps to monitor partners reaches 'epidemic proportions'
Dublin court rules brain-dead pregnant mother's life support can be switched off
Margaret Thatcher 'expressed fears of Asian rising' at Anglo-Irish summit in 1984
The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Rozanne Duncan: Ukip expels councillor for 'jaw-dropping' comments made in BBC TV interview
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
Katie Hopkins speaks out on childhood obesity: 'Parents of fat children should be prosecuted for child cruelty'
iJobs Money & Business
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...
Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...
Not specified: Selby Jennings: SVP Model Validation This top tiered investment...
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...