The owner of British Airways has mortgaged slots at Heathrow and Gatwick airports to secure $ 1.8bn (£1.3bn) of funding as experts warn airline revenues this year will be even worse than previously expected.
IAG, the FTSE 100 group that also owns Aer Lingus and Spain’s Iberia, pledged the take-off and landing slots to lenders to renew its corporate overdraft for up to five years.
It is the first time that IAG or British Airways has offered the slots as security to lenders.
The deal to refinance its revolving credit facility – loans that are similar to an overdraft – means IAG has an additional €400m (£350m) of funding once other loans maturing at the end of the month are repaid.
The BA owner is the dominant operator at Heathrow with approaching two-thirds of the airport’s slots. It also has just under one in four of Gatwick’s slots.
IAG did not disclose how many had been pledged to its lenders but deal insiders said only “a small number” had been offered as security.
Mortgaging airport slots to raise capital has been popular in the US for some time, but less common in the UK.
BA abandoned plans to issue a £250m corporate bond secured against its Heathrow slots in 2012. Virgin Atlantic struck a similar deal to raise £220m in 2015 and Norwegian refinanced debts two years ago by pledging Gatwick slots.
Tuesday’s move came as experts warned that the outlook until the middle of next year for the aviation industry has worsened.
Projected global revenue for airlines in 2021 fell by $ 21bn compared with previous forecasts to $ 316bn – less than half the revenue generated in 2019, consultancy Bain & Company said.
The UK will be the slowest of the G20 nations to recover with passenger numbers in July 2022 set to be 72pc of their 2019 equivalents. China is expected to have fully recovered and started to grow services. The US and EU will be at 79pc and 74pc respectively, Bain forecast.
Airline and travel stocks fell on Tuesday over concerns that a third wave of coronavirus could rule out holidays overseas this summer.