British Airways warns of deepening travel slump

British Airways has taken the axe to its winter flying schedules after posting a $1.5 billion quarterly loss. (Reuters)
Short Url
Updated 23 October 2020

British Airways warns of deepening travel slump

  • As a second wave of COVID-19 infections spreads across Europe, airlines are facing a bleak winter

LONDON: British Airways owner IAG warned the travel slump from the coronavirus pandemic had deepened, forcing it to axe even more of its winter flying schedule after it reported on Thursday a quarterly loss of €1.3 billion ($1.54 billion).

The loss was far larger than the €920 million forecast by analysts, as passenger numbers plunged and it struggled to even half-fill its planes, illustrating the scale of the challenge faced by IAG’s new boss, Luis Gallego, who took over in September.

As a second wave of COVID-19 infections spreads across Europe, airlines are facing a bleak winter and IAG joins Lufthansa, Ryanair and easyJet in cutting back already anemic schedules.

IAG, which also operates Iberia and Vueling in Spain and Aer Lingus in Ireland, said that for the fourth quarter — which includes the normally busy Christmas period — it would fly no more than 30 percent of the capacity it flew a year earlier, lower than previous guidance of 40 percent.

Shares in the company dropped 3 percent to 97 pence soon after the open. The stock has lost 78 percent in the year-to-date as the pandemic has crushed its business.

With less flying ahead, the group warned it no longer expected to reach breakeven in terms of net cash flow from operations in the fourth quarter, but said that liquidity was strong.

The company has raised €2.74 billion from shareholders via a rights issue and received the funds in early October, raising its total liquidity to €9.3 billion.

Bernstein analyst Daniel Roeska said even with that buffer IAG needed to focus on reducing costs.

“Management will need to significantly lower monthly cash burn to avoid significantly depleting resources by next summer,” he said.

But Goodbody analysts said that total liquidity was positive and IAG would be ready for a recovery in demand next spring.

IAG said it was operating in an environment of “high uncertainty.” It has been calling for COVID-19 tests at airports to replace quarantine requirements and said that governments had been slower than it expected to adopt such measures.

IAG said it would provide more detailed results on Oct. 30. 


Saudi PIF seeks investment flexibility with $5 billion-plus loan

Updated 4 min 32 sec ago

Saudi PIF seeks investment flexibility with $5 billion-plus loan

  • The loan finances are for use if and when the fund identifies investment opportunities 
  • PIF  is at the heart of the Kingdom’s strategy of economic diversification under its Vision 2030 reform plan

DUBAI: The Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth fund, is in talks with bankers to raise a loan of between $5 billion (SR18.75 billion) and $7 billion to provide flexibility in its investment strategy.

The PIF has declined to comment on reports of the loan, said to be in the form of a revolving facility from a number of international banks, but sources said it was part of the fund’s regular financing arrangements, which have seen it take out and repay facilities for the past two years.

The loan finances are for use if and when the fund identifies investment opportunities and may not necessarily be used.

The PIF has been opportunistic during the coronavirus pandemic in identifying what it saw as undervalued assets on global stock markets and has been an active trader in securities on international markets.

The fund invested $7 billion in mainly US stocks in the first quarter of the year, when markets were first impacted by pandemic lockdowns, and increased and diversified that in the second quarter. It scaled back its commitments in the third quarter when asset values were near all-time highs. In the summer, it spent $1.5 billion to acquire a stake in the Indian digital business Jio Platforms.

PIF, under governor Yasir Al-Rumayyan, is at the heart of the Kingdom’s strategy of economic diversification under its Vision 2030 reform plan, while simultaneously building an international portfolio of assets.

Earlier this year, PIF repaid a $10 billion syndicated loan ahead of schedule after it completed the sale of its stake in SABIC to Saudi Aramco, and in 2018 it raised an $11 billion term-loan facility from international banks.

Previous fundraisings were done in partnership with a group of 10 banks from the US, Europe, and Asia that form part of the fund’s “core banking relationships.”