BA Tries To Find Its Wings – US-FOREX.US
Will 1 billion be enough to get British Airways through a dour mix of slumping premium traffic, swine flu and staffing disputes? This was certainly the hope of investors as the beleaguered British airline announced plans to raise that amount by issuing convertible bonds and tapping funding that was set aside for its pension fund.Shares of the airline rose 3.5%, to 136 pence , as it joined Air France-KLM and Lufthansa in raising additional funds to shore up liquidity. It will raise 300 million pounds by selling convertible bonds which would be convertible to between 15 and 20% of its share capital by 2014, while the remaining 330 million pounds will be raised by taking over bank guarantees for the airline’s pension fund.Whether the amount will be enough to see British Airways through the recession is unclear – aside from the troubles plaguing the whole aviation industry in terms of falling demand and swine flu, British Airways is facing the prospect of strikes over its cost-cutting plans. It said it expects to post an operating loss of around 100 million pounds for the past quarter. The outlook for the global airline industry has continued to darken, with the International Air Transport Association announcing Thursday that business class revenue fell 23.6% in May. Airlines have responded with drastic measures – BA, for example, is looking to cut staff salaries to avoid further layoffs, and is currently said to be considering the sale of OpenSkies, a top-end airline which flies to New York from Amsterdam and Paris. Last week, ratings agency Moody’s cut its rating on British Airways
to Ba3 from Ba2, deeper into “junk” status.
Some hope is also being pinned on a merger with Spain’s Iberia, which has been in the cards for over a year now. Some observers think talks could gain pace under Iberia’s new chairman Antonio Vanzquez. However, it could follow in the footsteps of a tie up between Deutsche Lufthansa and Austrian Airlines. The German carrier on Thursday submitted revised offer terms to the European Commission for the Austrian firm.