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British Airways Signs New Agreements to Strengthen Liquidity
During this COVID-19 pandemic, many airlines have arranged several agreements with their national governments to save the business. However, none of them expected this crisis to last so long, and some carriers are asking their national institutions for new funds to survive the months to come.
That is the case at British Airways, as confirmed by its holding company, International Airlines Group (IAG). These two agreements that the British carrier have signed will increase its liquidity by $3.450 million (2.450 million pounds) as stated by IAG to the Spanish National Market Value Commission (CNMV).
Besides these two agreements, the U.K. flag carrier continues to make adjustments to its fleet to keep costs low in an effort to ride out the pandemic.
The first agreement was signed on Dec. 31, 2020 as an Export Development Guarantee loan given by several British banks and guaranteed by the UK Export Finance (UKEF). It was worth $2.8 million and will be paid in five years. The deadlines for that loan to be paid are still being negotiated and an agreement is expected to be signed by the end of February.
The second agreement was reached with the Trustee of the New Airways Pension Scheme (NAPS) to defer a payment of $630 million. That money refers to the airline’s contribution to the deficit of the pension fund expiring between October 2020 and September 2021. NAPS agreed to delay the payment of each of those monthly contributions to the end of the Recovery Plan that is fixed in March 2023.
As part of these new agreements, British Airways has agreed to not pay any further dividends to IAG until the end of 2023. To obtain these funds, the European carrier has used several real state assets as a warranty.
“Any of those payments to NAPS will reduce the outstanding pay balance and will be capped at that level. The requirement to make such payments to NAPS ceases after the deferred contributions have been reimbursed,” British Airways confirmed.
British Airways Sends Dreamliners to Storage
British Airways’ survival plan has also affected its growth perspective and its fleet. A couple of weeks ago, the third Boeing 787-10 that the European company has ordered was directly sent from production in Charleston to Victorville, California. There, it will be stored and wait until industry demand has improved.
The aircraft, registered G-ZBLD, is part of a larger order that has been postponed by British Airways, which is currently only operating two B787-10 aircraft. G-ZBLA, another Dreamliner that the airline is currently flying, is usually flown between London’s Heathrow Airport and Dallas Fort Worth, Texas while G-ZBLB, a third, usually connects London with Seattle-Tacoma International Airport, Washington.
British is also using Boeing 787-10s to perform charter cargo flights between Europe and Asia. However, the slow traffic recovery is making airlines reluctant to operate bigger aircraft, and British will surely think twice before adding more Dreamliners back into their fleet.
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